The Australian Stock Market-listed Funtastic, which spans toys, clothing and confectionery, warned investors that it expects to suffer a A$22 million to A$28 million (US$20-$25 million) impairment charge due to overstatement of the value of Madman.
“Funtastic has recently received two expressions of interest for the purchase of the Madman business. In the process of assessing these offers it has become evident that the carrying value (circa A$52 million) of Madman Entertainment is higher than its market value,” Funtastic said in a statement.
“It is anticipated that we will finalise a possible sale transaction of Madman prior to announcing out first half results and that our half year results will present Madman as a business up for sale.” Funtastic operates to an end of July financial year. Its half year results to end of January would normally be published in March or April.
Contacted by Variety, Madman executives said they were currently unable to comment.
The March 4 warning came only three weeks after Funtastic put out a statement (on Feb. 13) in response to an ASX enquiry about unusual share trading volumes and a price drop. In it said it was “Not aware of any other information that is likely to come as a surprise to the market,” though it admitted to “a number of business unit assessments.” Share trading in Funtastic was suspended two weeks later on Feb. 28.
The latest statement reveals three factors weighing heavily on Madman’s current performance: “a de-stocking within key customers as part of a proposed transition to a consignment stock model from the current sale and return practice; theatrical releases being rescheduled, particularly versus the prior year; conversion to digital has grown in excess of 40% but insufficient to offset the other [negative] factors.”
Madman’s prior year results show that it is heavily dependent on home entertainment. Some 79% of its revenues came from physical sales (DVD, CDs etc), with just 11% coming from theatrical and 10% coming from digital and ancillary. In the year to July 2013 revenues were an unchanged A$51 million, but EBITDA slipped from A$9.9 million in 2012 to A$8.2 million in 2013.
Madman had been a major buyer of independent films from Europe and Asia, and was a leading distributor of Japanese anime. It boasts inhouse releasing, marketing and technical capacity in Australia and New Zealand. Madman recently handled documentary “The Act of Killing,” “The Hunt,” “From Up On Poppy Hill,” and “Brighton Rock.”
It was also the Australian distributor of “Animal Kingdom” (pictured), the 2010 Australian crime thriller that propelled Jacki Weaver to a best supporting actress Oscar nomination.