数字王国(00547) - 2021 - 中期财报

Condensed Consolidated Statement of Profit or Loss The company's revenue from continuing operations increased by 25%, leading to a 70% gross profit growth, and a narrowed loss for the period Condensed Consolidated Statement of Profit or Loss (For the six months ended 30 June 2021) | Indicator | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | Revenue | 414,663 | 332,100 | | Cost of sales and services provided | (350,807) | (294,594) | | Gross profit | 63,856 | 37,506 | | Other income and gains | 55,520 | 82,140 | | Selling and distribution expenses | (2,719) | (639) | | Administrative expenses and other operating expenses, net | (182,560) | (219,145) | | Finance costs | (12,913) | (14,929) | | Impairment loss (recognized)/reversal on trade receivables and contract assets | (5,164) | 3,294 | | Impairment loss on amounts due from associates | (3,949) | – | | Share of loss of associates | (17,743) | (7,721) | | Fair value loss on financial assets at fair value through profit or loss | (16,394) | – | | Loss before tax | (122,066) | (116,695) | | Loss for the period from continuing operations | (121,791) | (116,886) | | Loss for the period from discontinued operations | – | (29,556) | | Loss for the period | (121,791) | (146,442) | | Loss per share from continuing operations attributable to owners of the Company (basic and diluted) | (0.256) HK cents | (0.293) HK cents | - Revenue from continuing operations increased by 25% year-on-year to HK$414,663 thousand, with gross profit growing by 70% to HK$63,856 thousand[2][125] - Loss for the period was HK$121,791 thousand, a reduction from HK$146,442 thousand in the prior year, primarily due to the exclusion of losses from discontinued operations[2][125] - Basic and diluted loss per share from continuing operations attributable to owners of the Company was HK$0.256 cents, an improvement from HK$0.293 cents in the prior year[4][84] Condensed Consolidated Statement of Comprehensive Income The total comprehensive loss for the period narrowed to HK$125,754 thousand, indicating an improvement compared to the previous year Condensed Consolidated Statement of Comprehensive Income (For the six months ended 30 June 2021) | Indicator | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | Loss for the period | (121,791) | (146,442) | | Other comprehensive income (net of tax) | (3,963) | (5,527) | | Total comprehensive income for the period | (125,754) | (151,969) | | Total comprehensive income attributable to owners of the Company | (108,377) | (131,554) | | Total comprehensive income attributable to non-controlling interests | (17,377) | (20,415) | - Total comprehensive loss for the period was HK$125,754 thousand, a reduction from HK$151,969 thousand in the prior year[8] Condensed Consolidated Statement of Financial Position Total assets increased, net current assets turned positive, and total equity improved, reflecting enhanced liquidity and capital structure Condensed Consolidated Statement of Financial Position (As at 30 June 2021) | Indicator | 30 June 2021 (Thousand HKD) | 31 December 2020 (Thousand HKD) | | :--- | :--- | :--- | | Non-current assets | | | | Property, plant and equipment | 77,675 | 75,477 | | Right-of-use assets | 73,429 | 88,415 | | Intangible assets | 760,000 | 737,030 | | Interests in associates | 254,510 | 265,104 | | Financial assets at fair value through profit or loss | 84,435 | – | | Total non-current assets | 1,293,342 | 1,210,892 | | Current assets | | | | Trade receivables, other receivables and prepayments | 165,911 | 154,657 | | Contract assets | 25,219 | 17,802 | | Bank balances and cash | 345,746 | 113,899 | | Total current assets | 536,876 | 286,358 | | Current liabilities | | | | Trade payables, other payables and accruals | 137,463 | 176,572 | | Borrowings | 59,203 | 154,285 | | Contract liabilities | 110,776 | 44,902 | | Total current liabilities | 349,552 | 418,352 | | Net current assets/(liabilities) | 187,324 | (131,994) | | Non-current liabilities | | | | Borrowings | 220,772 | 142,309 | | Lease liabilities | 60,806 | 77,220 | | Deferred tax liabilities | 47,544 | 46,498 | | Total non-current liabilities | 329,122 | 266,027 | | Total equity | 1,151,544 | 812,871 | | Equity attributable to owners of the Company | 1,074,724 | 841,431 | | Non-controlling interests | 76,820 | (28,560) | - Total assets increased to HK$1,830,218 thousand (31 December 2020: HK$1,497,250 thousand), primarily driven by a significant increase in bank balances and cash[10][125] - Net current assets improved from a deficit of HK$131,994 thousand as at 31 December 2020 to a surplus of HK$187,324 thousand, with the current ratio increasing from 0.7 to 1.5, indicating significant liquidity improvement[10][251] - Total equity increased to HK$1,151,544 thousand, with non-controlling interests turning from negative to positive, reflecting an improved capital structure[10] Condensed Consolidated Statement of Changes in Equity Share capital increased due to new share subscriptions, non-controlling interests turned positive from capital injection, and accumulated losses were offset by share premium transfer Condensed Consolidated Statement of Changes in Equity (For the six months ended 30 June 2021) | Indicator | 1 January 2021 (Thousand HKD) | 30 June 2021 (Thousand HKD) | | :--- | :--- | :--- | | Share capital | 340,754 | 408,902 | | Share premium | 1,984,773 | – | | Contributed surplus | 594,690 | 594,690 | | Accumulated losses | (2,072,872) | 80,392 | | Total attributable to owners of the Company | 841,431 | 1,074,724 | | Non-controlling interests | (28,560) | 76,820 | | Total equity | 812,871 | 1,151,544 | - Share capital increased by HK$68,148 thousand due to shares issued from subscription[17] - Non-controlling interests received a capital injection of HK$122,757 thousand, turning from a negative to a positive value[17] - Accumulated losses changed from a deficit of HK$2,072,872 thousand to a surplus of HK$80,392 thousand by transferring share premium to contributed surplus and offsetting accumulated losses[17] Condensed Consolidated Statement of Cash Flows Net cash used in operating activities decreased, while net cash from financing activities significantly increased, primarily driven by new share issuance and non-controlling shareholder contributions Condensed Consolidated Statement of Cash Flows (For the six months ended 30 June 2021) | Indicator | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | Net cash used in operating activities | (34,481) | (60,327) | | Net cash used in investing activities | (172,200) | (127,242) | | Net cash from financing activities | 429,456 | 2,615 | | Net increase/(decrease) in cash and cash equivalents | 222,775 | (184,954) | | Cash and cash equivalents at 30 June | 248,683 | 122,507 | - Cash outflow from operating activities decreased from HK$60,327 thousand in 2020 to HK$34,481 thousand in 2021[20] - Cash outflow from investing activities increased, mainly due to the purchase of financial assets at fair value through profit or loss amounting to HK$102,394 thousand[24][95] - Net cash inflow from financing activities significantly increased to HK$429,456 thousand, primarily from proceeds of HK$340,435 thousand from the issuance of ordinary shares and HK$122,757 thousand from non-controlling shareholders' capital injection[24] Notes to the Unaudited Condensed Consolidated Interim Financial Statements This section provides detailed notes on the basis of preparation, accounting policies, changes in standards, key judgments, segment reporting, and specific financial statement line items 1. Basis of Preparation and Accounting Policies The interim financial statements are prepared in accordance with HKAS 34 and Appendix 16 of the Listing Rules, using the historical cost convention, with early adoption of HKFRS 16 amendments - The Group has early adopted the amendments to HKFRS 16 'COVID-19-Related Rent Concessions beyond 30 June 2021'[34] 2. Changes in Hong Kong Financial Reporting Standards The Group adopted all effective new or revised HKFRSs, including early adoption of HKFRS 16 amendments on COVID-19 rent concessions, simplifying accounting for lease payment reductions - Amendments to HKFRS 16 expanded the practical expedient, allowing lessees to treat rent concessions affecting payments due on or before 30 June 2022 as changes in floating interest rates[38][39] - Amendments to interest rate benchmark reform provide temporary relief to address the financial reporting impact when interbank offered rates are replaced by risk-free rates, including simplified accounting for contract modifications and hedge designations[39][40] 3. Application of Judgements and Estimates Significant management judgments and key sources of estimation uncertainty in preparing the interim financial statements remain consistent with the 2020 annual consolidated financial statements 4. Revenue and Segment Reporting The Group operates solely in the media entertainment segment, with continuing operations revenue growing 25% year-on-year, driven by strong performance in the US and UK markets - The Group has only one operating and reportable segment: the media entertainment segment, which includes visual effects production, post-production, 360-degree panoramic digital capture technology applications, virtual reality services, and virtual reality content licensing[48] Revenue Analysis from Continuing Operations (For the six months ended 30 June 2021) | Service Type | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | Visual effects production services | 371,038 | 304,607 | | Post-production services | 8,933 | 5,299 | | 360-degree panoramic digital capture technology applications and virtual reality services | 31,980 | 22,194 | | Licensing of virtual reality content | 2,712 | – | | Total | 414,663 | 332,100 | Revenue from Continuing Operations by Geographical Location (For the six months ended 30 June 2021) | Region | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | China | 35,596 | 23,407 | | United States | 171,011 | 88,485 | | Canada | 183,824 | 215,559 | | United Kingdom | 20,769 | 2,671 | | Europe | 2,890 | – | | Other countries/regions | 573 | 1,978 | | Total | 414,663 | 332,100 | - Trade receivables increased from HK$40,798 thousand as at 31 December 2020 to HK$52,718 thousand as at 30 June 2021, contract assets increased from HK$17,802 thousand to HK$25,219 thousand, and contract liabilities increased from HK$44,902 thousand to HK$110,776 thousand[73] 5. Finance Costs Finance costs for the period decreased to HK$12,913 thousand from HK$14,929 thousand in the prior year, mainly due to reduced accrued interest on lease liabilities Finance Costs (For the six months ended 30 June 2021) | Item | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | Accrued interest on lease liabilities | 5,440 | 8,197 | | Interest on bank and other borrowings | 7,473 | 6,574 | | Total | 12,913 | 14,929 | 6. Loss Before Tax Loss before tax for the period narrowed to HK$122,066 thousand from HK$150,235 thousand in the prior year, primarily due to the exclusion of discontinued operations' losses and reduced amortization and depreciation expenses - Loss before tax was HK$122,066 thousand, an improvement from HK$150,235 thousand in the prior year[61] - Non-cash outflow expenses recognized included HK$1,235 thousand for equity-settled share-based payments (2020: HK$6,418 thousand) and HK$30,248 thousand for amortization and depreciation expenses (2020: HK$43,227 thousand)[125] - Share of loss of associates was HK$17,743 thousand (2020: HK$7,721 thousand), and fair value loss on financial assets at fair value through profit or loss was HK$16,394 thousand[125] 7. Taxation Taxation for continuing operations resulted in a credit of HK$275 thousand, compared to a charge of HK$191 thousand in the prior year, mainly due to deferred tax impacts Taxation (For the six months ended 30 June 2021) | Item | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | Current tax for the period from continuing operations – overseas tax | 18 | 459 | | Deferred tax for the period from continuing operations | (293) | (268) | | Total for continuing operations | (275) | 191 | | Current tax for the period from discontinued operations | – | (3,984) | 8. Loss Per Share Basic and diluted loss per share from continuing operations attributable to owners of the Company improved to HK$0.256 cents from HK$0.293 cents in the prior year, with both being identical due to anti-dilutive share options Loss Per Share Calculation (For the six months ended 30 June 2021) | Item | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | Loss for the period from continuing operations attributable to owners of the Company for basic loss per share calculation | (103,796) | (107,455) | | Weighted average number of ordinary shares for basic loss per share calculation | 40,490,250,641 | 36,629,352,477 | | Loss per share from continuing operations attributable to owners of the Company (basic and diluted) | (0.256) HK cents | (0.293) HK cents | - Basic and diluted loss per share are identical as outstanding share options had an anti-dilutive effect on basic loss per share[86][87] 9. Intangible Assets The carrying value of intangible assets increased to HK$760,000 thousand, primarily due to additions of proprietary software and film rights, and exchange adjustments Carrying Value of Intangible Assets (As at 30 June 2021) | Item | 30 June 2021 (Thousand HKD) | 31 December 2020 (Thousand HKD) | | :--- | :--- | :--- | | Goodwill | 309,879 | 310,047 | | Trademarks | 159,217 | 155,270 | | Proprietary software | 90,544 | 95,075 | | Patents | 80,355 | 81,622 | | Film rights | 119,452 | 94,355 | | Total | 760,000 | 737,030 | - Additions to intangible assets during the period amounted to HK$32,479 thousand, mainly comprising HK$7,009 thousand for proprietary software and HK$24,943 thousand for film rights[89] 10. Financial Assets at Fair Value Through Other Comprehensive Income The Group holds unlisted equity instruments as strategic investments, with fair value changes recognized in other comprehensive income, resulting in a cumulative fair value adjustment of negative HK$196,213 thousand - The Group acquired unlisted equity instruments in 2018 for US$25,000,000 (approximately HK$196,213,000) and designated them as financial assets at fair value through other comprehensive income[90] - A cumulative fair value adjustment (downward) of HK$196,213,000 has been recognized in other comprehensive income since 2019[90] 11. Financial Assets at Fair Value Through Profit or Loss The Group added HK$84,435 thousand in financial assets at fair value through profit or loss during the period, primarily from acquiring listed equity securities in asknet Solutions AG and Highlight Event and Entertainment AG - Approximately 19% of the ordinary shares of asknet Solutions AG, a German e-commerce company, were acquired on 3 February 2021 for a consideration of approximately HK$34,586 thousand[92] - Approximately 3.01% of the ordinary shares of Highlight Event and Entertainment AG, a Swiss media and sports marketing company, were acquired on 26 February and 6 May 2021 for a total consideration of approximately HK$67,808 thousand[93][202] Movement in Financial Assets at Fair Value Through Profit or Loss (As at 30 June 2021) | Item | Amount (Thousand HKD) | | :--- | :--- | | At 1 January 2021 | – | | Additions during the period | 102,394 | | Fair value loss recognized in profit or loss | (16,394) | | Exchange adjustments | (1,565) | | At 30 June 2021 | 84,435 | 12. Fair Value The carrying amounts of the Group's financial assets and liabilities approximate their fair values, with fair value measurements categorized into three levels, where listed equity investments are Level 1 and unlisted equity investments are Level 3 - The Group considers that the carrying amounts of trade receivables, other receivables and deposits, trade payables, other payables and accruals, bank balances and cash, lease liabilities, and borrowings approximate their fair values[99] Fair Value Hierarchy (As at 30 June 2021) | Item | Level 1 (Thousand HKD) | Level 2 (Thousand HKD) | Level 3 (Thousand HKD) | Total (Thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Financial assets at fair value through other comprehensive income — unlisted equity investments | – | – | – | – | | Financial assets at fair value through profit or loss — listed equity investments | 84,435 | – | – | 84,435 | 13. Trade Receivables, Other Receivables and Prepayments The total of the Group's trade receivables, other receivables, and prepayments increased to HK$208,710 thousand, with total trade receivables at HK$52,718 thousand and an average credit period of 30 days Trade Receivables, Other Receivables and Prepayments (As at 30 June 2021) | Item | 30 June 2021 (Thousand HKD) | 31 December 2020 (Thousand HKD) | | :--- | :--- | :--- | | Total trade receivables | 52,718 | 40,798 | | Consideration receivables | 33,942 | 33,648 | | Other receivables | 50,678 | 57,433 | | Prepayments | 25,236 | 20,028 | | Subtotal current portion | 165,911 | 154,657 | | Subtotal non-current portion | 42,799 | 44,375 | | Total | 208,710 | 199,032 | - The aging analysis of trade receivables shows an increase in amounts outstanding for 91-365 days and over 365 days[106] 14. Trade Payables, Other Payables and Accruals The Group's total trade payables, other payables, and accruals decreased to HK$137,463 thousand, primarily due to a reduction in other payables Trade Payables, Other Payables and Accruals (As at 30 June 2021) | Item | 30 June 2021 (Thousand HKD) | 31 December 2020 (Thousand HKD) | | :--- | :--- | :--- | | Total trade payables | 28,871 | 37,943 | | Other payables | 30,439 | 66,654 | | Accruals | 78,153 | 71,975 | | Total | 137,463 | 176,572 | 15. Share Capital The company's issued and fully paid share capital increased by HK$68,148 thousand due to new share subscriptions, totaling 40,890,276,258 shares Movement in Share Capital (As at 30 June 2021) | Item | Number of Ordinary Shares | Amount (Thousand HKD) | | :--- | :--- | :--- | | At 31 December 2020 | 34,075,516,258 | 340,754 | | Shares issued from subscription | 6,814,760,000 | 68,148 | | At 30 June 2021 | 40,890,276,258 | 408,902 | 16. Share-based Payment Transactions The Group recognized equity-settled share-based payment expenses of approximately HK$1,235 thousand during the period, a significant decrease from the prior year, with a weighted average exercise price of HK$0.253 per share for outstanding options - For the six months ended 30 June 2021, the Group recognized equity-settled share-based payment expenses of approximately HK$1,235 thousand (2020: HK$6,418 thousand)[114] - The weighted average exercise price for outstanding share options was HK$0.253 per share, with an average remaining contractual life of 5.23 years[113] 17. Capital Commitments The Group had no significant capital commitments at the end of the reporting period - The Group had no significant capital commitments as at 30 June 2021 and 31 December 2020[115] Financial and Business Review The Group's continuing operations saw a 25% revenue increase and 70% gross profit growth, driven by the media entertainment segment, with ongoing advancements in visual effects, virtual reality, and virtual human businesses, alongside European market expansion and strategic partnerships Media Entertainment Segment Media entertainment segment revenue grew to HK$414,663 thousand, with loss narrowing to HK$81,177 thousand, primarily due to virtual human technology R&D costs, showing significant progress in visual effects, virtual reality, and virtual human businesses globally Media Entertainment Segment Financial Performance (For the six months ended 30 June 2021) | Indicator | 2021 (Thousand HKD) | 2020 (Thousand HKD) | | :--- | :--- | :--- | | Revenue | 414,663 | 332,100 | | Loss | (81,177) | (97,280) | | EBITDA | (36,854) | (56,720) | - Media entertainment segment revenue increased by 25% year-on-year, with narrowed loss and reduced EBITDA loss, indicating improved operating efficiency[132] - Loss includes research and development costs and expenses for virtual human technology[132] A. Visual Effects Production and Post-Production Business The Group's visual effects and post-production businesses were active in North America, China, and India, serving Hollywood blockbusters, TV series, commercials, and games, earning multiple industry awards and nominations - Digital Domain North America (DDNA) won Telly Awards Gold and Silver for visual effects on 'Ghost of Tsushima' trailer and 'Perfect Dark' game trailer, and an Immersive & Mixed Reality Silver for a Super Bowl commercial[134] - DD3I artists provided visual effects services for multiple Marvel films, including 'Shang-Chi and the Legend of the Ten Rings', 'Doctor Strange in the Multiverse of Madness', 'Spider-Man: No Way Home', and Warner Bros. film 'Fantastic Beasts: The Secrets of Dumbledore'[140] - Digital Domain's visual effects team completed work for popular TV and streaming shows 'WandaVision', 'Loki', 'Ms. Marvel', and 'She-Hulk'[147][148][149][150] - Digital Domain China provided visual effects and color grading for films and series like 'Hi, Mom' and 'Cliff Walkers', and post-production services for top brands including Apple, Coca-Cola, and Huawei[169][170] - Digital Domain India, as part of its global production strategy, passed MPAA, Disney, and Marvel content security audits and completed the annual Trusted Partner Network (TPN) assessment process[171] B. Virtual Reality, Augmented Reality, New Media and Experiential Projects The Group offers diverse products and services in the emerging VR market, including VR streaming platforms, interactive toolkits, 360-degree video capture, and real-time VR experiences, providing custom applications and content for brands and game developers - The New Media team collaborated with the Virtual Human Group to produce a virtual human commercial for Vince Lombardi for Super Bowl LV[174] - Produced a game cinematic for Studio Wildcard's 'ARK 2', creating realistic character appearances, with the trailer already released[174] - Used 'Charlatan' software to add 30 years of aging to David Beckham's face for the 'Malaria Must Die' project[175] - Partnered with TIME Magazine and Epic to recreate Martin Luther King Jr.'s 'The March' in the game 'Fortnite'[176] C. Virtual Human Business (North America and Greater China) The Group continues to advance virtual human technology, exploring autonomous virtual humans through machine learning and real-time demonstrations in North America, while developing virtual idols and applications in Greater China, securing patents, and expanding into corporate events, online interviews, and advertising - The North America Virtual Human Group (VHG) shared insights on machine learning in visual effects and autonomous virtual human creation at VFXRio, NVIDIA webinars, and the Real Time Conference[184] - In Greater China, the Group developed virtual human characters/IPs such as ZEN Sheng Nan, Sandra, STAR, M.E., and Class Monitor Xiao Ai, collaborating with Nicholas Tse, Cheng Wei Group, and Dr. Simon Chang[189][190][191] - Successfully filed a US provisional patent application for 'Method for generating facial expression animation and its neural network training method', helping maintain a competitive edge in virtual human technology[190] - Virtual human 'Elbor' collaborated with BMW Taiwan for a brand advertisement, showcasing real-time capture and rendering technology[191] D. Formation of Joint Venture and Investment in Europe The Group is actively expanding into the European market by forming the DDCP joint venture and investing in German e-commerce company asknet Solutions AG and Swiss media and sports marketing company Highlight Event and Entertainment AG, exploring opportunities in education technology and media marketing - Formed a joint venture, Digital Domain Capital Partners S.à r.l. (DDCP), with Digital Knight Finance S.à r.l., with the Company holding a 60% interest[197] - DDCP acquired approximately 19% equity in German e-commerce company asknet Solutions AG, aiming to apply virtual human technology in European education and lifelong learning, and distribute software and hardware products[199][200] - DDCP acquired approximately 3.01% equity in Highlight Event and Entertainment AG, a Swiss media and sports marketing company engaged in film, sports, and event marketing[202] Interests in Associates The Group's associates, including 3Glasses Group, Teresa Teng virtual human business, Beijing Xugu Technology, and Digital Domain Space, continue to innovate in VR hardware, virtual human content, and immersive experiences 3Glasses Group 3Glasses Group leads in VR hardware, software development, and solutions, holding 423 core patents, collaborating with Qualcomm and BOE, and achieving market success with its VR headsets and panoramic short films - 3Glasses Group primarily engages in the research, development, and sales of virtual reality hardware, smart wearable devices, virtual reality software development kits, and other related products[203] - Recognized as the first official certified partner of Qualcomm's XR SIMPLEVIEW program and collaborated with BOE to develop ultra-light and thin VR optical components[204] - Its X1S smart glasses won the 'German iF Design Award' and successfully connected 15 5G mobile phones directly to the X1S, expanding 5G+VR applications[205] - As at 30 June 2021, 3Glasses Group had applied for 423 virtual reality core patents[206] Teresa Teng Virtual Human Business and Xugu Future Technology (Beijing) Co., Ltd. The Teresa Teng virtual human business utilizes deep learning and real-time rendering for a new virtual Teresa Teng, featured in holographic concerts and memorial halls. Beijing Xugu Technology leverages Digital Domain's virtual human tech for virtual IP live streaming, content marketing, and commercial expansion, collaborating with Alibaba DAMO Academy on smart virtual anchors and sign language motion capture - The new virtual human Teresa Teng applies deep learning, real-time rendering technology, allowing for live control and various performances through the Mystique Live system[212] - Teresa Teng virtual human holographic concerts have been launched at Digital Domain Haikou Cyberpunk Digital Park and Beijing Heping Guoju, with ongoing performances at Chongqing Hongyadong[213] - Beijing Xugu Technology creates an immersive live streaming experience with 'real person + virtual human' co-hosting, bringing new opportunities to the live streaming industry[215] - Collaborated with Wanglaoji and Reign Total Body Fuel for virtual IP product promotion and served as virtual hosts for the China Youth Network Spring Festival Gala[215][216] - Partnered with Alibaba DAMO Academy to develop 'Smart Virtual Anchor' for a new generation of 24-hour live commerce services and collaborated on a 'Sign Language Motion Capture Production Project'[216][222] - Class Monitor Xiao Ai has appeared on CCTV programs multiple times and produces original children's science content across various platforms, expanding brand collaborations in children's apparel and education[217][220][222] Digital Domain Space (VR Cinema and DD Land) Digital Domain Space develops and executes leading VR experiences, establishing multiple VR cinemas in China and co-building "DD Land" (Cyberpunk Digital Park) with Zhongdi Jiyue, offering holographic and VR cinema digital entertainment services - Digital Domain Space holds a 34.42% interest, dedicated to developing and executing leading virtual reality experiences, and has established several new virtual reality cinemas in China[223] - 'DD Land' (Cyberpunk Digital Park), co-built with Zhongdi Jiyue, launched in Haikou in December 2020, offering holographic cinema, VR cinema, and MR future arena services[223] - Share of loss of this associate and impairment loss on amounts due from associates was HK$2,227 thousand (2020: HK$6,106 thousand)[223] Events After the Reporting Period Post-reporting period, the company raised additional capital through new share subscriptions under a general mandate, proposed a share capital reorganization and change in board lot size, and announced the acquisition of a 40% non-controlling interest in its subsidiary DDCP to increase control Subscription of New Shares Under General Mandate On 21 July 2021, the company entered into a subscription agreement with an independent third party to allot and issue 2,400,000,000 new ordinary shares at HK$0.065 per share, raising approximately HK$155,500,000 for general working capital and European business restructuring - On 30 July 2021, the share subscription was completed, raising an additional cash of approximately HK$155,500,000[116] - The proceeds are intended for the Group's general working capital and potential business restructuring in Europe[225] Proposed Share Capital Reorganisation and Change in Board Lot Size The Board proposed consolidating every 10 existing shares into 1 consolidated share, reducing the par value per share from HK$0.10 to HK$0.01, and changing the board lot size from 10,000 shares to 5,000 adjusted shares - Proposed to consolidate every 10 existing shares into 1 consolidated share, increasing the par value from HK$0.01 to HK$0.10[118][226] - Following the share consolidation, the issued share capital will be reduced, decreasing the par value of each issued consolidated share from HK$0.10 to HK$0.01, with the credit transferred to the contributed surplus account[118][226] - The board lot size will be changed from the current 10,000 existing shares to 5,000 adjusted shares[226] Discloseable and Connected Transaction Regarding Acquisition of 40% Non-Controlling Interests in DDCP, a Subsidiary of the Company Digital Domain Broadcasting, a wholly-owned indirect subsidiary, will acquire a 40% equity interest in DDCP for approximately HK$122,267,000 in cash, increasing the company's control over DDCP to 100%, subject to independent shareholders' approval as a discloseable and connected transaction - On 16 August 2021, the Company announced the acquisition of a 40% equity interest in DDCP for a total cash consideration of approximately HK$122,267,000[120][231] - Upon completion of the acquisition, the Company's controlling interest in DDCP will increase from 60% to 100%, making DDCP an indirect wholly-owned subsidiary of the Company[120][231] - This transaction constitutes a discloseable and connected transaction, subject to reporting, announcement, and independent shareholders' approval requirements under the Listing Rules[231][232] Other Important Information This section covers interim dividend policy, share capital changes, liquidity and financial resources, foreign exchange risk, contingent liabilities, employee and remuneration policies, outlook, share option scheme details, and interests of directors and major shareholders Interim Dividend The Board resolved not to declare an interim dividend for the six months ended 30 June 2021 - The Directors resolved not to declare an interim dividend for the six months ended 30 June 2021 (2020: nil)[124] Share Capital The total number of issued shares was 40,890,276,258 as at 30 June 2021, increasing to 43,290,276,258 after the completion of Subscription II post-reporting period, with multiple share option schemes granted but no options exercised, cancelled, or lapsed during the review period - On 18 January 2021, the Company completed a subscription, issuing 6,814,760,000 shares to HLEE Finance S.à r.l., raising approximately HK$340,538,000 for joint venture formation, media entertainment segment, and general working capital[235] - As at 30 June 2021, the total number of issued shares was 40,890,276,258; after the completion of Subscription II on 30 July 2021, it increased to 43,290,276,258 shares[236] - The Company granted multiple tranches of share options to grantees under the share option scheme with varying exercise prices and periods, but no options were exercised, cancelled, or lapsed during the review period[237][238][243][244][245] Liquidity, Financial Resources, Group Assets Pledged and Gearing Ratio The Group has diverse financing sources, including bank and non-bank loans, with significantly improved liquidity, a current ratio increasing from 0.7 to 1.5, and a gearing ratio decreasing from 49% to 35%, indicating a robust financial position - The Group has bank facilities from banks in the US and Canada, some of which are secured by time deposits or corporate guarantees[246] - As at 30 June 2021, total cash and bank balances amounted to HK$345,746,000[251] Liquidity and Gearing Ratio (As at 30 June 2021) | Indicator | 30 June 2021 | 31 December 2020 | | :--- | :--- | :--- | | Current assets | HK$536,876,000 | HK$286,358,000 | | Current liabilities | HK$349,552,000 | HK$418,352,000 | | Current ratio | 1.5 | 0.7 | | Gearing ratio | 35% | 49% | Foreign Exchange Fluctuation Risk and Related Hedging The Group's revenue, expenses, assets, and liabilities are primarily denominated in HKD, USD, CAD, RMB, INR, and EUR; currently, no hedging is planned for exchange rate fluctuations, but the situation is continuously reviewed - The Group's financial activities are primarily denominated in HKD, USD, CAD, RMB, INR, and EUR[254] - Currently, there are no plans to hedge against exchange rate fluctuations in RMB, CAD, INR, and/or EUR, but economic conditions and foreign exchange risk exposure are continuously reviewed[254] Contingent Liabilities Except for disclosures under "Potential Indemnities" in the media entertainment segment, the Group had no significant contingent liabilities at the end of the reporting period - Except for disclosures under 'Potential Indemnities' in the media entertainment segment, the Group had no significant contingent liabilities as at 30 June 2021[255] Employees and Remuneration Policies of the Group The Group employs 1,132 individuals, with a remuneration policy designed to maintain competitiveness and offer benefits such as discretionary bonuses, share option schemes, and pension plans - As at 30 June 2021, the Group had a total of 1,132 employees[256] - The remuneration policy maintains competitiveness and provides discretionary bonuses, share option schemes, and pension plans[256] Outlook Facing ongoing COVID-19 impacts, the Group maintains a conservative business strategy, continues to explore new projects and opportunities in visual effects, virtual reality, and virtual humans, and increases R&D investment while seeking financing and strategic collaborations for future growth - With the global economy affected by the COVID-19 pandemic, the Group continues to adopt a conservative business strategy, including cost control, business direction, and product portfolio[257] - In visual effects, despite extended production periods for feature films, opportunities for visual effects work in online games, TV series, and commercials have increased[258] - Virtual reality business activities have slowed, and efforts are underway to expand non-media entertainment applications (e.g., education market) and broaden the product portfolio[261] - Continues to explore new business opportunities and products (e.g., Artificial Intelligence (AI)) in the virtual human field with strategic business partners and/or investors, and develop new technologies to enhance interaction[261] - Will continue to allocate significant financial and human resources to ongoing research and development of innovative technologies, and to recruit and retain suitable talent globally[262] Share Option Scheme The company's share option scheme aims to reward directors, employees, and other contributors; as at 30 June 2021, 2,264,653,349 share options remained unexercised, with no options granted, exercised, cancelled, or lapsed during the review period - The share option scheme, adopted on 27 April 2012 and amended on 3 April 2014, aims to grant share options as incentives to directors, employees, and other contributors to the Group[266] Overview of Share Option Movements (As at 30 June 2021) | Item | At 1 January 2021 | Granted during the review period | Exercised during the review period | Cancelled/Lapsed during the review period | At 30 June 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total | 2,264,653,349 | – | – | – | 2,264,653,349 | Interests of Directors and Chief Executive As at 30 June 2021, Mr. Xie An, Executive Director and CEO, held a long position interest of approximately 5.16% in the company's issued share capital and 100,000,000 share options Interests and Short Positions of Directors and Chief Executive in Shares and Underlying Shares (As at 30 June 2021) | Director Name | Capacity | Number of Shares Held | Number of Underlying Shares Held | Total Interests (Long/Short Position) | Approximate percentage of issued share capital | | :--- | :--- | :--- | :--- | :--- | :--- | | Xie An | Interest of controlled corporation and beneficial owner | 2,008,531,324 | 100,000,000 | 2,108,531,324 (Long Position) | 5.16% | | | Interest of controlled corporation | 502,134,789 | – | 502,134,789 (Short Position) | 1.23% | - Mr. Xie An holds 100% equity interest in Global Domain Investments Limited and is therefore deemed to be interested in the shares held by it[276] - Mr. Xie An holds 100,000,000 share options granted under the share option scheme[277] Interests of Substantial Shareholders and Other Persons As at 30 June 2021, several substantial shareholders and other persons held interests in the company's shares and underlying shares, with Mr. Ng Clive Cheang Neng holding approximately 16.67% and Poly Culture Group Corporation Limited holding approximately 13.02% Interests and Short Positions of Substantial Shareholders and Other Persons in Shares and Underlying Shares (As at 30 June 2021) | Name/Person | Capacity | Number of Shares Held | Number of Underlying Shares Held | Total Interests (Long/Short Position) | Approximate percentage of issued share capital | | :--- | :--- | :--- | :--- | :--- | :--- | | Xie An | Interest of controlled corporation and beneficial owner | 2,008,531,324 | 100,000,000 | 2,108,531,324 (Long Position) | 5.16% | | | Interest of controlled corporation | 502,134,789 | – | 502,134,789 (Short Position) | 1.23% | | Smart Concept Holdings Limited | Person with security interest in shares, beneficial owner and interest of controlled corporation | 2,316,654,789 | – | 2,316,654,789 (Long Position) | 5.67% | | Jia Wei Holdings Limited | Interest of controlled corporation | 2,316,654,789 | – | 2,316,654,789 (Long Position) | 5.67% | | Zhou Jian | Interest of controlled corporation and beneficial owner | 2,381,878,527 | 150,000,000 | 2,531,878,527 (Long Position) | 6.19% | | C Digital Libraries Inc. | Interest of controlled corporation | 6,814,760,000 | – | 6,814,760,000 (Long Position) | 16.67% | | Ng Clive Cheang Neng | Interest of controlled corporation | 6,814,760,000 | – | 6,814,760,000 (Long Position) | 16.67% | | Poly Culture Group Corporation Limited | Beneficiary of trust (excluding discretionary interest) | 5,323,600,000 | – | 5,323,600,000 (Long Position) | 13.02% | | Jetlink Holdings Limited | Beneficial owner | 5,037,200,000 | – | 5,037,200,000 (Long Position) | 12.32% | | Tang Elaine Yilin | Interest of controlled corporation | 5,037,200,000 | – | 5,037,200,000 (Long Position) | 12.32% | | CITIC Limited | Interest of controlled corporation | 2,181,178,182 | – | 2,181,178,182 (Long Position) | 5.33% | | CITIC Group Corporation | Interest of controlled corporation | 2,181,178,182 | – | 2,181,178,182 (Long Position) | 5.33% | | Chan Ka Wing | Interest of controlled corporation and beneficial owner | 2,044,110,000 | – | 2,044,110,000 (Long Position) | 5.00% | | Chou Yung Ming | Interest of controlled corporation | 2,176,041,324 | – | 2,176,041,324 (Long Position) | 5.32% | | | Interest of controlled corporation | 602,561,746 | – | 602,561,746 (Short Position) | 1.47% | - Mr. Ng Clive Cheang Neng holds 6,814,760,000 shares through C Digital Libraries Inc., representing approximately 16.67% of the issued share capital[280][289] - Poly Culture Group Corporation Limited holds 5,323,600,000 shares, representing approximately 13.02% of the issued share capital[283] Disclosure Pursuant to Rule 13.21 of the Listing Rules A discontinued subsidiary previously received bank facilities with specific performance obligations; despite its liquidation, the company and other subsidiaries provided no corporate guarantees for this financing - A Hong Kong bank provided HK$6,000,000 in bank facilities to a discontinued indirect subsidiary of the Company's entertainment media segment, imposing specific performance obligations requiring the Company to hold no less than 51% beneficial equity interest in that subsidiary[291] - The subsidiary was placed into provisional liquidation in July 2012 and into joint and several liquidation in July 2013; the Company and other subsidiaries provided no corporate guarantees for this financing[291] Purchase, Sale or Redemption of the Company’s Listed Securities Neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the review period - Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the review period[292] Corporate Governance The company generally complied with the Corporate Governance Code during the review period, with exceptions including the unseparated roles of Chairman and CEO, non-executive directors lacking specific appointment terms, and some non-executive directors' absence from the AGM - The Company generally complied with the Code Provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules during the review period, with exceptions for the unseparated roles of Chairman and Chief Executive, non-executive directors and independent non-executive directors lacking specific appointment terms, and some non-executive directors' inability to attend the Annual General Meeting[293] Changes in Directors' Information During the review period, Independent Non-executive Director Mr. Wong Ka Kong passed away, and Mr. Wang Wei Chung resigned as Non-executive Director. Dr. Chang San Cheng was appointed Executive Director, Mr. Brian Thomas McConville as Non-executive Director, and Mr. Hu Jing Heng as Independent Non-executive Director - Independent Non-executive Director Mr. Wong Ka Kong passed away in May 2021[296] - Mr. Wang Wei Chung resigned as Non-executive Director, effective 25 June 2021[297] - Dr. Chang San Cheng was appointed Executive Director, Mr. Brian Thomas McConville as Non-executive Director, and Mr. Hu Jing Heng as Independent Non-executive Director, all effective 28 June 2021[298] Directors' Securities Transactions The company adopted the Model Code for Securities Transactions by Directors of Listed Issuers as its code of conduct for directors' securities transactions, and all directors confirmed compliance during the review period - The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers as its code of conduct for directors' securities transactions[299] - All Directors confirmed their compliance with the required standards set out in the Model Code throughout the review period[300] Review by Audit Committee The company's Audit Committee reviewed the interim report for the review period - The Company's Audit Committee reviewed the Company's interim report for the review period[301]