A spend of €2.06m in redundancy payments resulted in multi-award winning animation studio firm Brown Bag Films recording pre-tax losses of €1.14m last year.
New consolidated accounts filed by Brown Bag Films UC show that the group recorded the pre-tax losses for 2023 after a number of years of strong profits on the backing of the streaming content boom.
The group recorded the loss after revenues decreased by 31% or €10.1m from €32.74m to €22.62m in the 12 months to the end of August last.
The pre-tax loss of €1.14m followed a pre-tax profit of €6.92m in 2022.
In their report, the directors state that the €2.06m exceptional cost from the redundancy programme "reflects changes in the industry which left the group with the unfortunate course of action to reduce its headcount".
Numbers employed at the group last year reduced by 72 from 302 to 230 and the reduction in employees resulted in staff costs decreasing by 12% or €2.69m from €22.08m to €19.38m.
The accounts show that the group - which operates studios in Dublin, Toronto and Bali - declared a dividend of €1.9m last year.
The directors state that they are satisfied with the performance of the business given the level of investment during the year.
The business - celebrating its 30th year in business this 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 this year.
In an interview on RTE Radio One's The Business in March, Mr Gaffney spoke about the recent downturn in the industry.
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"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.
In the year under review, Brown Bag's Eva The Owlet debuted on Apple TV.
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 company believes it has sufficient experience to meet these risks while delivering profitable revenue growth".
Before taking the group's €2.06m exceptional cost on the redundancy programme and interest payments of €351,700 into account, Brown Bag Films UC’s operating profits declined by 85% from €7.24m to €1.27m.
The pre-tax losses for last year also take account of non-cash depreciation costs of €930,877 and non-cash amortisation costs of investment in film and TV of €295,565.
Directors' pay increased from €798,812 to €842,107.
The firm recorded a post tax loss of €677,163 after recording a corporation tax gain of €466,497.
Shareholder funds at the end of August last year totalled €26.88m. Cash funds stood at €2.55m.
Reporting by Gordon Deegan
