Montreal: Cinar Corporation expects to generate close to 40% of its top-line revenues in 1999 from its higher-margin education division. Sales from the new division accounted for 27% of the $36.5 million in first-quarter revenues.

‘We’re seeing demand ramping up because there’s more concern from parents about their kids’ education,’ says recently named senior executive vp Hasanain Panju. ‘And the u.s. government has also made a point of investing in the education system.’

Cinar built its education division through $160 million worth of acquisitions that include Carson-Dellosa Publishing, based in Greensboro, North Carolina, HighReach Learning, based in Charlotte, nc, and Edusoft, based in Tel Aviv, Israel. Wild Goose, a science-kit product line, is handled through the Carson-Dellosa distribution system.

Cinar’s top-line revenue breakdown for the quarter ending Feb. 28 includes $19.6 million from production activity, typically the company’s slowest quarter, and $16.9 million from the two higher-margin categories – $7.1 million in library sales and $9.8 million from the educational division. ebitda is $8.6 million, up 20% over ’98, while net earnings increased 22% to $4.5 million, or an eps of $0.14.

Gross margin for quarterly education sales is 53%, up from 48% in ’98. Income from Edusoft (purchased late last year) will be consolidated starting in the next quarter.

Panju says multimedia producer Edusoft gives the company an electronic publishing line. ‘It also gives us a broader international distribution system, and an expanded product line.’

He says there are potential synergies within the division, in both operations and product development terms.

Edusoft had sales of us$13 million in ’98, 85% outside North America.

Carson-Dellosa’s distribution system (preschool to eight-year-olds) reaches 1.6 million u.s. teachers and 3,600 school supply stores. ‘Carson-Dellosa has been there for over 20 years. That was one of the key elements when we acquired that company,’ Panju says.

HighReach’s product lines (16-month to kindergarten) are distributed to 350,000 licensed daycares in the u.s.

‘Now we have an overall extensive distribution system on the education front which is really parallel to the product lines market we reach on the entertainment side,’ says Panju, adding:

‘Carson-Dellosa is distributing a range of books, chartlets, puzzles and abcs (based on the Richard Scarry franchise), and will do more.’

At the moment, Cinar has very limited Canadian education sales, but a distribution office in Toronto is ‘definitely under consideration.’

Cinar’s education division accounted for $44.9 million in sales in fiscal ’98, or close to 30% of the $146.4 million in total operational revenues. Year-to-year sales growth for the division was 246%. Total ’98 revenues, including income from interest, was $151 million.

New production

In the quarter, Cinar delivered 50 half-hours including 32 animation half-hours, among them Patrol 03, The Wombles and Ripley’s Believe it or Not! New animation production includes the 2D/3D series Flight Squad; Journey to the West, coproduced with China’s cctv; Poe Lite, a kid-friendly take on the mystery classics; X-Ducks, a duck-character extreme sports concept; and The Baskervilles, a minority series with Carleton in the u.k. and a French partner.

At the agm in Montreal April 21, Cinar chairman and co-ceo Micheline Charest said the Edusoft unit will help open up the company’s profile on the Internet.

Charest also said a new tv series based on the Richard Scarry property is in development.

Cinar made several management nominations at the agm. Jeff Gerstein, former vp finance, replaces Panju as vp/cfo. Lucy Caterina is promoted to corporate controller and Marie-Josee Corbeil, who continues as vp and general counsel/corporate secretary, is promoted to executive vp in the company’s entertainment division. Mario Ricci is promoted to vp, operations.

Steve Carson replaces Panju as president of Cinar Education.

U.S. market overview

Total sales of children’s education products (kids 12 years and under) in the u.s. is over us$10 billion a year, including us$2.6 billion in publishing sales, us$1 billion in educational software sales and us$2.6 billion in school supplies.

(Total program spending in the u.s. was pegged at $14.7 billion in ’97, with a projected 5.4% annual growth rate through to 2006.)