Visual effects maker Rainmaker Income Fund (TSX:RNK.UN) reported a net loss in its first quarter on higher expenses from the acquisition of Mainframe Entertainment.
The $4.5 million loss in the quarter compared with a net profit of $227,000 in the first quarter of 2006, despite a 47% increase in its quarterly revenue.
Revenue rose to $13.5 million compared with $9.2 million in 2006's first quarter.
Rainmaker rolled up an extra $4 million in expenses related to the Mainframe acquisition. Its operating costs also increased $3.3 million as the company invested in more complex and lower margin projects to build reputation and relationships in the industry. The opening of Rainmaker's London office also added to the company's quarterly costs.
Given the competitive nature of the visual effects industry, Rainmaker said it had created a special committee to evaluate the company's future as an income trust. In addition to evaluating the appropriateness of the income trust structure, it plans to review its distribution policy, explore the sale of non-core assets and examine additional acquisitions and other strategic alternatives.
The company is pursuing a more aggressive growth strategy that will require the income trust to re-invest its cash from operations. It decided to suspend distributions following the April distribution, which was paid May 15.
Rainmaker's share price range during the past week: between $3.55 and $3.64; 52-week high: $3.64; 52-week low: $3.