EXCLUSIVE: Aardman, the iconic UK animation studio behind Chicken Run and Wallace & Gromit, has closed around 20 jobs as it grapples with the increased cost of production.

Deadline understands that Aardman is in the process of making less than 5% of its 425 employees redundant following a savings review undertaken by management.

A third of the redundancies were voluntary, while two roles remain in consultation. It is hoped that some of the individuals who have lost their jobs can return to Aardman on a freelance basis.

As part of the restructure, Aardman has created new roles to wring increased value out of its intellectual property. These roles include a senior licensing manager and sales executive.

The cost-cutting initiative comes as Aardman has filed its earnings for 2023, which reveal that the studio sunk to a pre-tax loss of £550,135 ($720,000). The company made a profit of £1.56M in 2022.

Aardman said the loss was largely because of a £1.75M impairment of unrecouped costs on Lloyd of the Flies, a 2022 animated series that debuted on CITV in the UK and was licensed by Tubi in the U.S. Putting the impairment to one side, Aardman’s underlying profit was £1.6M.

“Although well-received on release, performance of the [Lloyd of the Flies] brand has been adversely affected by current very challenging market conditions,” Aardman said in its earnings.

It is not the first time Aardman has written down the value of a brand. Timmy Time, the preschool Shaun the Sheep spin-off series, was also impacted by challenging market conditions. The show did, however, go on to sell in 80 territories worldwide.

Like many producers in the UK, Aardman said its overheads hit a record high as it wrestled with the increased cost of energy, rent, and technology, as well as challenges around “paying market rates to attract and retain talent.”

Aardman’s revenue fell 16% to £26.7M in the year to December 31, 2023, according to the earnings published at the UK’s Companies House.

The company is in production on Wallace & Gromit: Vengeance Most Fowl for the BBC and Netflix, while other projects in the works include Season 7 of Shaun the Sheep and a pilot titled Sugarloaf.

Sean Clarke, Aardman’s managing director, said: “It is no secret that the entertainment industry is going through much change and uncertainty at the moment, and we have looked to take a proactive approach that focuses on our strengths and allows us to address these challenges whilst continuing to develop and produce award-winning work.

“It is sad to say goodbye to any members of the team, but the changes that we have made will ensure Aardman is well-placed to navigate the current market and can look to the future with confidence – and several major new greenlit productions, which we will be announcing in the new year.”