TORONTO — Kids’ TV production house Nelvana reported a huge drop in its second quarter earnings Friday, which analysts say is the short-term cost of its latest book publishing acquisition.
Earnings for the second quarter ended June 30 were C$100,000 ($68,000), down from $952,000 for the second quarter of 1999. Nelvana attributed the drop, in part, to the cost of financing its $74 million April purchase of U.S. kids’ book publisher Klutz.
“Ultimately, as the company benefits from a higher revenue base, we’re going to see a material increase in performance,” predicted entertainment analyst Adam Shine of CIBC World Markets in Montreal, who categorized the company’s performance in the quarter as solid, despite the drop in earnings.
Nelvana’s revenues for the quarter were up sharply, at $17.5 million, almost double the year-earlier result. Company benefited from the inclusion of six weeks of Klutz’s revenues, as well as revenues per episode nearly double those of a year ago and ongoing increases in merchandising revenues, Shine noted.
Nelvana execs are among those with an eye on the assets of embattled Montreal-based animation company Cinar Corp. While Nelvana lacks the muscle of rumored competitors Disney, Nickelodeon (whose parent company is Viacom), AOL Time Warner, or even CanWest Global or Alliance Atlantis, Shine notes that the fit with Nelvana would be very strong, once outstanding legal and fiscal issues are settled.