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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