The entertainer: Jeremy Banks of Coolabi speaks to Stockopedia

When Jeremy Banks took up the role of chief executive at AIM listed Coolabi (LON:COO) in September 2006, he was tasked with breathing new life into the ailing media group. Since then he has pulled off a string of acquisitions and built a portfolio of creative properties – ranging from family favourites such as Purple Ronnie and The Clangers to high growth new additions like Poppy Cat and The Large Family. Banks is confident that his portfolio of assets is well poised to grow despite tough trading conditions – and further acquisitions remain firmly on the agenda.

An accountant by trade, Banks joined Coolabi from Chorion plc, where he held the roles of commercial director and finance director from 2001 until the group was acquired by private equity firm 3i (LON:III) in 2006. Before that, he joined Guinness Mahon Development Capital shortly before it was bought out by its management to form ProVen Private Equity, the niche venture capital house whose focus was media and branded content transactions. In the 18 months to December 31, 2009, Coolabi delivered an Ebitda profit of £0.20m on revenues of £2.8m. In its latest figures to June 30, 2010, Ebitda profits came in at £0.02m on revenues of £0.96m, with expectations that a much stronger second half will see the numbers continue in a positive direction. For investors eyeing the wider sector, Coolabi’s presence in the Media segment of the AIM market means that its peers range from the likes of Dcd Media (LON:DCD) , Dori Media Group (LON:DMG) , Dq Entertainment (LON:DQE) , Galleon Holdings (LON:GON) and Ten Alps Plc (LON:TAL) .

Stockopedia spoke to Jeremy Banks about the development of Coolabi’s property portfolio, his expectations for the group in the second half of this year and his plans to grow the business in the longer term.

Jeremy, what do your latest results say about the evolution of Coolabi and the opportunities in your markets?

I’m going to widen the answer to that a tiny bit because we were brought in to affect a turnaround of this group a few years back now and so really we’re on a journey, and where we are at the moment is chalk and cheese from where we were just a very, very short time ago. We have bought five companies in the last few years and all of those companies have performed at least as well as the expectations we set when we acquired them. We knew the first half of this year was going to be comparatively quiet when it came to television production earnings. But because we’re in production and well along the path with our next series, a series called Poppy Cat, we can say with some confidence, that that’s going to be delivered from later this year.

How long does it take to get a series like that through the production process?

I’d love to give you a stock answer to that, I’m afraid it’s a ‘how long is a piece of string’ question because you have animation, which is different from live action in terms of length of time and something called CG – computer generated animation – which is very different from traditional stock frame animation. So there is never any set timetable but what we all try and do in the industry is smooth out the lumps and bumps of the different types of production by scale, and that’s where we all need to get to.

Has the economic downturn affected you and your markets over the past couple of years?

Yes. If you look at things like licensing and merchandising, people obviously spend less in the shops. But there is a silver lining to that cloud because retailers, in particular, very often return to what they know and what they’re most comfortable with. So if you have in your portfolio one or two classic, established properties, like, let’s say, Bagpuss or Purple Ronnie, then retailers often go back to those because they just know that they sell because they’ve sold for years and years.

On the TV production side, again it’s a trickier market, certainly than it was a few years back, but if you go about things the right way, if you invest in high quality assets and you use high quality people to produce those TV series, then you give yourself every chance of getting it away.

You’ve got some very interesting assets in your portfolio – from Ivor the Engine to Poppy Cat. Tell me what makes a good property in your eyes and the challenges of driving those through to revenues? As somebody with a great deal of experience in private equity does that uncertainty fill you with unease?

Oh no, good Lord, I’m very excited about it. The principals associated with Coolabi ran two of the very, very successful IP companies of the last decade. Chorian and Britt Allcroft, which became Gullane Entertainment, between them owned Thomas the Tank Engine, Noddy, Mr Men, Agatha Christie – huge amounts of IP.

On the property side, there are two things really. You either go for classics, the sort of brands that I just mentioned, and we’ve got a few of those: Clangers, Ivor, Purple Ronnie, whatever it might be, or you go for what I might call a contemporary classic, so they’re properties that haven’t been around for a long time but you just know they’ve got a certain longevity to them. Possibly the best example of that is going to be something like Harry Potter, it’s only been around a short time but you know it’s going to sustain itself.

Now something like Poppy Cat, if you have kids, the chances are if you don’t, one of your friends will have a series of these books. They have only been around for a few years but they have already sold 2.5 million copies and that just gives you a huge amount of comfort that mums like the brand and trust the brand, kids like the brand and ask for more and also it’s sold in a number of different territories, which means it’s got an international profile. So if you start producing TV off the back of that you’re able to sit in front of a broadcaster or whatever other partner it might be, and you have compelling, anecdotal third party evidence that says ‘This is popular, people like it and want to consume it’.

What sort of competition do you face in the market?

Well I wouldn’t say they are my competitors but as an industry you have the likes of the companies that I just mentioned, Corian, Hit Entertainment, Classic Media and others who are very, very substantial, they’re multi $100m companies and we’re very, very small in comparison with them. But we have good assets, both established ones and ones, most importantly, which are growing quickly and there is room for small operators such as ours because we’re just not competing directly with somebody who owns Thomas the Tank Engine, for example.

In terms of expansion you’ve said you’re keen to pick up acquisitions. What is the landscape like for doing deals and what sort of properties would you be looking at?

It’s very tough is the honest answer. The first few years, as I mentioned earlier, we bought five companies in pretty short order, we were averaging a good business every six months or so and as you mentioned, my background is partly in private equity but that’s one of the reasons I was brought in to turn this around, was to buy assets. In terms of the environment at the moment there is good deal flow. I still see high quality assets, both small companies and much, much larger ones. The disconnect, of course, is the ability to raise funds in the market the way it is at the moment.

You have got a broad spread of investors – a mix of institutional, big name individuals and retail holders. From a private investor perspective how important is the retail investor community to you and how do you communicate with them?

Well, our institutional shareholder base really came in a couple of years ago and a number of them were shareholders who supported me in Chorian. Because a number of the larger IP companies had been taken private these shareholders were looking to support the next thing. They came in a couple of years ago and have been enormously supportive despite the market being quite tough. In terms of retail support I would say it is vital at the moment.

Finally, what are your expectations for the rest of the year in terms of figures, achievements and possible expansion?

I remain very positive. We’ve got some good assets. We’ve got some nice established ones and we’ve got some good ones in development and, as I say, we have access to high quality deal flow as well and there is always the possibility of undertaking further acquisitions. There’s lots and lots of hard work to do, the trading environment is tough, but we’ve got good visibility on what we’re trying to do and I’m, as you say, very enthusiastic about it.

Thank you for talking to Stockopedia.

Many thanks.