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Two deals help put Storyland on road to flotation Dundee company aims for more success

TWO breakthrough deals have put Dundee animation com-pany Storyland on the road to flotation on the Alternative Investment Market, possibly as early as the summer of next year.

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David Evans, chief executive, said he sees the upsurge in business and the fact that pub-lic markets are at last beginning to thaw as the ideal opport-unity to look for another £ 3m to take the ambitious creative house to the next stage of its development. It would be the culmination of a long-term relationship between Evans, formerly the joint chief executive of medical diagnostics front-runner Axis Shield, and Storyland creative director Joe Austen, who has been producing children's stories for decades. Evans said: ''The great attraction of children's material is that, after the initial stages, most of the cash generated is pure profit. There is effectively no cost of sale attached. Once the creative input is right, it is just a case of reproducing it. And children's material tends to have a long life-span - I have great admiration for the people behind Thomas the Tank Engine, for instance.'' Storyland has just signed a deal with Korean company MK technologies which will see its characters appearing on at least 30,000 items, including books and videos. As well as the entertainment side, the characters will also be used to teach Korean children English as a second language. It has also signed with Mal-aysian Airlines to show its Music and Moonlight video - an animated tale involving the voice of impressionist and comedian Rory Bremner - over the Christmas period. Other deals, particularly in Malaysia, Thailand and China, are in the pipeline. Evans, as managing director of Shield Diagnostics, engin-eered its merger with Norway's Axis Biochemicals, increasing turnover from £ 2m to £ 37m. He was first joint chief executive, then deputy, then parted company amicably with Axis Shield once the marriage had bedded down. He said: ''I had met Joe when I was working with Tayside Enterprise in the early nineties. Part of the deal when with Axis Shield was that I did not take on another executive role in biochemicals, and when I left, it was with the specific intention of working with Joe.'' Evans raised a total of £ 2.22m from private investors - including himself - Aberdeen Murray Johnstone, and East of Scotland Investments. He now holds 10% of the company and Austen has 40%. One of the first moves with the start-up capital was to buy back, for £ 170,000, rights to Austen's Storyland and the Magic House series from Carlton and SMG. Evans said: ''The company now owns all the underlying rights to the intellectual property and intends to build on that to create a portfolio of products.'' The capital from a flotation, he said, would be used in three main thrusts: to buy an established property with consistent revenue streams; to break into the important American market; and to buy a distribution business. At present, deals are brokered and distribution arranged by long-term partners and agents Criterion, which is more cost-effective than employing a sales team. The downside of this arrangement is that margins are squeezed, with a range of agencies in line for a cut. ''The deal we have just now is, roughly, a dollar a package, whether it is a DVD, a video, or a book,'' said Evans. ''Even at this rate, sales for 2004 will be in the region of £ 250,000. Once, however, we are able to bundle a variety of properties together, we should be able to lever up the margins.'' He said Storyland had made ''considerable progress'' over the past year, although there was a lot of water to flow under the bridge yet. He forecast a US deal in the first or second quarter of next year. In the event of flotation, he said, he would want to strengthen the company management and marketing, with the possible appointment of a new chief executive - in which case he would step back to a non-executive role. It would also mean increasing the full-time staff from three to eight or 10 and drawing even more heavily on Dundee's pool of freelance design and animation talent.

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