(Incorporated in Bermuda with limited liability)
(Stock Code: 547)
HONG KONG, Sept. 3, 2021 /PRNewswire/ — During the first half of 2021, the Group witnessed positive tractions driven by increase in revenue, improvements in gross profit and decreased loss of the period:
- Due to the recovery of COVID-19 pandemic and the resumption of film exhibition, revenue from previous visual effects works is being recognized in the first half of 2021. The Group shall recorded a revenue of HK$415 million during the 1H2021 (1H2020: HK$332 million), representing an increase of 25% to the previous corresponding period;
- Gross profit margin increased from 11.3% in the previous corresponding period to 15.4% for 1H2021. Gross profit of the period recorded a significant increase to approximately HK$64 million (1H2020: HK$38 million, representing an increase of 68%);
- Loss for the period is approximately HK$122 million (1H2020: HK$146 million, representing a decrease of 17%). The decrease in losses shows positive effects in the Company’s cost-control measures, reducing the Company’s administrative and other net operating expenses from approximately HK$219 million in the previous corresponding period to HK$183 million during 1H2021, representing a decrease of 17%;
- With adjustments for non-cash items, including unrealized fair value losses from decreased share price in the investments in asknet Solutions AG and Highlight Events and Entertainment AG by Digital Domain Capital Partners S.à r.l. (“DDCP”) (a joint venture formed in January 2021), impairment loss on trade receivables and contract assets, impairment of receivables from Group’s associates Beijing Xu Gu and DD Space, and share of losses of Group’s associate 3Glasses, the Group records an adjusted net loss of HK$79 million (1H2020: HK$142 million);
- The Group’s cash position remains strong at approximately HK$346 million for 1H2021 (31 December 2020: HK$114 million);
Notable Projects and Contracted Amount
The Group’s business verticals of feature, episodic, commercials, and new media experiences has witnessed strong, positive upward trajectory. Global industry demand is now at an all time high and we aim to capitalize and grow our business and revenue. With several highly anticipated projects in the works, Digital Domain is continuing to expand and diversify its visual effects portfolio, working closely with all the major studios including Warner Bros., New Line, Netflix, Amazon, HBO, Universal and Paramount, in addition to long-time partner Marvel.
Since 1 January 2021, Digital Domain’s global team has provided VFX services on the following notable projects:
-Loki Season 1
-Shang-Chi and the Legend of the Ten Rings
-West Side Story
-Spider-Man: No Way Home
-Doctor Strange in the Multiverse of Madness
-Black Panther: Wakanda Forever
-Fantastic Beasts and Where to Find Them 3
-Stranger Things Season 4
Events after the first half of 2021
On 21 July 2021, the Group announced the proposed subscription of new shares to raise US$20 million (approximately HK$156 million) at the subscription price of HK$0.065 per subscription share. The subscription price represent (i) a premium of approximately 6.56% to the closing price of HK$0.061 per share on the date of the subscription agreement on 21 July 2021, and (ii) a premium of approximately 2.85% to the average closing price per share of HK$0.0632 of the five consecutive trading days immediately preceding the date of the subscription agreement. Concurrent to the new share subscription, it is also proposed that the Group shall implement the consolidation of the Group’s shares in accordance to the request by the Hong Kong Stock Exchange.
On 16 August 2021, it is proposed that the Group to purchase 40% equity interest of DDCP, a joint venture that provides the opportunity to co-invest and development the European market formed between the Group and Mr. Clive Ng in January 2021 for an aggregate cash consideration of EUR13.33 million. DDCP currently holds approximately 19% equity in asknet Solutions AG, an established procurement, e-commerce and payment specialist with a strong position in the German-speaking academic market listed on the Frankfurt Stock Exchange (ticker code: ASKN), and approximately 3.01% in Highlight Event and Entertainment AG, a film and sport & event marketing company listed on SIX Swiss Exchange (ticker code: HLEE.SW). Upon completion of the acquisition, DDCP will become an indirect wholly-owned subsidiary of the Company. The reason for the acquisition of DDCP is that the Group holds an optimistic view in the long term development of education and the media and entertainment business in the European and American market. By having full control of DDCP, it enables the Group to have greater flexibility in deploying the cash and resources being held by DDCP and expedite business development strategies favourable to the Group’s development in the education and media & entertainment segments.
2H 2021 Outlook
As of August 2021, the North America VFX team has recorded a contract amount of US$101 million, and is on track with our projected revenue in 2021. For the Group to sustain double-digit growth, we need an increased capex investments into our core VFX business in North America. This includes newer technology, which will provide us with resources necessary to take on a larger volume of projects and increase efficiencies and throughput, while simultaneously continuing our efforts to improve cost control to capture the recovery of the media and entertainment industry to achieve fiscal success in the future. The Group has also taken significant efforts to position our Virtual Human technologies as the standard of choice for multiple metaverse developers, aiming to commercialize and increase Virtual Human technologies’ capital flows through metaverse applications.