IMAX CHINA(01970) - 2025 - 中期财报

Management Discussion and Analysis This section analyzes the group's financial performance, liquidity, and capital resources, detailing operating results and key financial metrics Overview and Business Segments The group's revenue primarily stems from Content Solutions and Technology Products and Services, encompassing film conversion, cinema system sales, leasing, and maintenance - The Group's revenue primarily comes from two core business segments: Content Solutions (film conversion and distribution) and Technology Products and Services (cinema system sales, leasing, and maintenance)[10][11][12] 2025 Fiscal Year First Half Revenue by Segment | Segment | Revenue (Thousand USD) | % of Total Revenue | | :--- | :--- | :--- | | Content Solutions | 20,801 | 36.0% | | Technology Products and Services | 36,230 | 62.7% | | All Other | 771 | 1.3% | | Total | 57,802 | 100.0% | 2025 Fiscal Year First Half Gross Profit by Segment | Segment | Gross Profit (Thousand USD) | Gross Margin (%) | | :--- | :--- | :--- | | Content Solutions | 19,197 | 92.3% | | Technology Products and Services | 20,686 | 57.1% | | All Other | 217 | 28.1% | | Total | 40,100 | 69.4% | Content Solutions Content Solutions revenue is generated from a percentage of box office receipts from Hollywood, Chinese, and other films converted to IMAX format - Content Solutions revenue is derived from a percentage of box office receipts from partner films (Hollywood, Chinese, etc.) converted and distributed to the IMAX cinema network[11] Technology Products and Services Technology Products and Services revenue includes sales and leases of IMAX cinema systems, revenue-sharing, maintenance, and other cinema-related item sales - Technology Products and Services revenue comprises: - Sales and Sales-Type Leases: design, manufacturing, and installation fees for cinema systems - Revenue-Sharing Arrangements: leasing systems to exhibitors for future box office revenue sharing - Maintenance Revenue: ongoing maintenance, warranty, and technical support services - Other Cinema Revenue: aftermarket sales of 3D glasses, screens, and more[12][14] Comparative Operating Results In H1 2025, total revenue grew 31.7% to $57.8 million, operating profit increased 93.7% to $30.2 million, and net profit rose 88.9% to $23.9 million, driven by Content Solutions' strong box office recovery and improved gross margins H1 2025 vs H1 2024 Operating Results | Metric (Thousand USD) | H1 2025 | H1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 57,802 | 43,901 | +31.7% | | Gross Profit | 40,100 | 25,102 | +59.8% | | Operating Profit | 30,196 | 15,592 | +93.7% | | Profit for the Period | 23,893 | 12,648 | +88.9% | | Adjusted Profit | 24,815 | 13,401 | +85.2% | - Revenue growth was primarily driven by an $11.5 million increase in Content Solutions revenue and a $2.1 million increase in Technology Products and Services revenue[26] Revenue Comparison Total revenue increased by 31.7%, primarily driven by Content Solutions, which surged 123.7% to $20.8 million due to a 91.2% rise in IMAX format film box office to $205.5 million and higher-commission Chinese film box office share - Content Solutions revenue increased by 123.7% year-on-year, primarily due to increased box office revenue and a higher proportion of local language films with higher commission rates; IMAX format film box office revenue increased by 91.2% year-on-year to $205.5 million[27] - Technology Products and Services revenue increased by 6.2% year-on-year, mainly due to a $7 million increase in revenue-sharing arrangements, partially offset by a $5.5 million decrease in sales and sales-type lease revenue[29] IMAX Cinema System Installations | Business Arrangement | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Sales and Sales-Type Lease Arrangements | 9 | 4 | | Revenue-Sharing Arrangements | 15 | 6 | | Total | 24 | 10 | Cost of Sales Comparison Total cost of sales decreased by 5.9% to $17.7 million, with Content Solutions' cost of sales falling 30.4% due to fewer Hollywood films screened and lower per-film costs, while Technology Products and Services' costs slightly decreased by 3.1% from reduced depreciation under revenue-sharing arrangements - The Group's total cost of sales decreased by 5.9% from $18.8 million to $17.7 million[36] - Content Solutions' cost of sales decreased by 30.4%, primarily due to fewer Hollywood films screened in mainland China and lower DMR conversion and marketing costs per film[37] Gross Profit and Gross Margin Comparison Group gross profit significantly increased by 59.8% to $40.1 million, with gross margin improving from 57.2% to 69.4%, primarily driven by Content Solutions' 174.3% gross profit growth to $19.2 million and 92.3% gross margin, reflecting network operating leverage - Overall group gross profit increased by 59.8% year-on-year, with gross margin improving from 57.2% to 69.4%[43] - Content Solutions gross profit increased by 174.3%, with gross margin rising from 75.4% to 92.3%, primarily due to operating leverage from 91.2% box office growth and reduced costs[44] - Technology Products and Services gross profit increased by 14.4%, with gross margin rising from 53.1% to 57.1%[45] Other Expenses and Profit Comparison Selling, general, and administrative expenses slightly increased by 2.9%, other operating expenses rose due to higher licensing fees to IMAX Corporation from increased revenue, and financial asset impairment shifted from provision to reversal due to enhanced collection efforts, resulting in a period profit increase of 88.9% to $23.9 million - Selling, general, and administrative expenses slightly increased by 2.9% to $7 million[50] - Financial asset impairment impact shifted from a $0.4 million provision in the prior period to a $0.1 million reversal in the current period, mainly due to enhanced collection efforts for trade receivables[52][19] - Income tax expense increased by 86.8% to $7.1 million due to a significant increase in profit before tax[55] - Profit for the period was $23.9 million, compared to $12.6 million in the prior period[56] Liquidity and Capital Resources As of June 30, 2025, the group's net current assets increased to $191.3 million from $164.7 million at year-end 2024, with cash and cash equivalents rising to $94.2 million, reflecting capital management goals to ensure going concern, maximize shareholder returns, and maintain an optimal capital structure Liquidity Position (Thousand USD) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | 226,116 | 198,702 | | Total Current Liabilities | 34,839 | 34,014 | | Net Current Assets | 191,277 | 164,688 | | Cash and Cash Equivalents | 94,172 | 80,049 | - The increase in net current assets was primarily attributable to a $15.4 million increase in trade and other receivables and a $14.1 million increase in cash and cash equivalents[59] - Capital management objectives include safeguarding the ability to continue as a going concern, maximizing shareholder returns, and optimizing the capital structure to reduce the weighted average cost of capital[61] Cash Flow Analysis In H1 2025, net cash from operating activities was $19.3 million, largely consistent with the prior period, while net cash used in investing activities was $3.2 million, primarily for cinema equipment under revenue-sharing arrangements, and net cash used in financing activities was $2.2 million, mainly for share repurchases and equity incentive settlements Condensed Cash Flow Statement (Thousand USD) | Cash Flow Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 19,295 | 19,657 | | Net Cash Used in Investing Activities | (3,187) | (3,216) | | Net Cash Used in Financing Activities | (2,209) | (1,492) | | Increase in Cash and Cash Equivalents for the Period | 14,123 | 14,746 | - Net cash inflow from operating activities was $19.3 million, primarily from $31 million in profit before tax, partially offset by working capital changes (mainly increased trade receivables) and taxes paid after adjusting for non-cash items[62] - Net cash outflow from investing activities was $3.2 million, primarily for the installation of IMAX cinema equipment under comprehensive revenue-sharing arrangements[64] - Net cash outflow from financing activities was $2.2 million, mainly for $1.5 million in share repurchases[66] Capital Commitments and Working Capital As of June 30, 2025, the group's capital commitments totaled $1.3 million, primarily for property, plant, and equipment acquisitions, with working capital needs met by operating cash flow and an unutilized RMB 400 million (approximately $55.8 million) unsecured revolving credit facility from Bank of China and HSBC - As of June 30, 2025, contracted but unprovided capital expenditure amounted to $1.3 million[69] - The Group has unsecured revolving credit facilities totaling up to RMB 400 million (approximately $55.8 million) with Bank of China and HSBC to meet working capital requirements[73] - As of June 30, 2025, the Group had no outstanding borrowing capital, bank overdrafts, or other similar debts[74][78] Key Financial Ratios and Dividends As of June 30, 2025, the capital-to-debt ratio decreased from 21.7% to 20.0% due to increased equity, while the adjusted profit margin significantly improved from 30.5% to 42.9%, and the board resolved not to declare an interim dividend for the six months ended June 30, 2025 Key Financial Ratios | Ratio | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Capital-to-Debt Ratio | 20.0% | 21.7% | | Ratio | H1 2025 | H1 2024 | | Adjusted Profit Margin | 42.9% | 30.5% | - The Board has resolved not to declare any interim dividend for the six months ended June 30, 2025[84] Corporate Governance Summary and Other Information This section outlines the company's share repurchase activities, adherence to corporate governance principles, and details on connected transactions and equity-based compensation plans Share Repurchase and Corporate Governance In the six months ended June 30, 2025, the company repurchased 1,495,900 listed shares for approximately HKD 11.27 million on the Stock Exchange, while maintaining high corporate governance standards and public float, with minor exceptions for director attendance at the AGM - For the six months ended June 30, 2025, the company repurchased 1,495,900 shares on the Stock Exchange, totaling approximately HKD 11.27 million[87][88] - The company is committed to maintaining high corporate governance practices and has complied with all code provisions of the Corporate Governance Code, with minor exceptions for certain directors' absence from the Annual General Meeting[91][93] - The company has established Audit, Remuneration, and Nomination Board Committees to manage and oversee specific matters[97] Connected Transactions The group engages in various ongoing connected transactions with its controlling shareholder, IMAX Corporation and its subsidiaries, primarily involving equipment supply, technology and trademark licensing, and film DMR conversion and distribution services, which are fundamental to the group's operations and comply with Listing Rules - The Group has multiple ongoing connected transactions with its controlling shareholder, IMAX Corporation, which are crucial to the Group's business and cover technology, brand, equipment, and content services[104] H1 2025 Key Connected Transaction Amounts (Thousand USD) | Transaction Type | Payable to IMAX Corp. | Receivable from IMAX Corp. | | :--- | :--- | :--- | | Equipment Supply | 3,768 | - | | Master Distribution Agreement (Hollywood Films) | 1,277 | 3,255 | | DMR Services (Chinese Films) | 504 | 347 | | Technology License | 1,803 | - | | Trademark License | 1,202 | - | | Enhanced Business | 64 | 722 | Discloseable and Announceable Connected Transactions These transactions require disclosure and announcement under Listing Rules but are exempt from independent shareholder approval, including trademark and technology licensing, DMR services, and Enhanced business agreements, forming the framework for the group's core technology, brand authorization, content production, and back-office support - Trademark License Agreement: IMAX Corporation grants the Group exclusive rights to use IMAX-related trademarks in Greater China, with a fee of 2% of total revenue; approximately $1.202 million was paid in H1 2025[111][121][124] - Technology License Agreement: IMAX Corporation grants the Group exclusive rights to use related equipment and service technologies, with a fee of 3% of total revenue; approximately $1.803 million was paid in H1 2025[126][137][139] - DMR Services Agreement: IMAX Corporation provides DMR conversion services for Chinese films, with a fee of actual cost plus 10%; approximately $0.504 million was paid in H1 2025[143][147][150] - Enhanced Business Agreement: The Group collaborates with IMAX Corporation to develop the IMAX Enhanced business, involving license fee payments and revenue sharing; in H1 2025, the Group paid approximately $0.064 million in license fees and received approximately $0.722 million in revenue sharing[168][173] Discloseable, Announceable, and Shareholder Approved Connected Transactions These transactions, due to their significant value, require disclosure, announcement, and shareholder approval (though exempted), primarily including the Equipment Supply Agreement and Master Distribution Agreement, which are core channels for the group to acquire IMAX cinema system hardware and Hollywood film content - Equipment Supply Agreement: IMAX Corporation supplies cinema system-related equipment to the Group, with a purchase price of actual cost plus 10%; in H1 2025, the Group paid approximately $3.768 million for equipment for 24 systems[185][188][189] - Master Distribution Agreement: IMAX Corporation provides Hollywood films for screening in Greater China, with the Group paying a fixed conversion fee and receiving a portion of box office revenue; in H1 2025, the Group paid $1.277 million in conversion fees for 8 films and received $3.255 million in revenue[192][197][204] Equity and Remuneration This report discloses shareholdings of directors, key executives, and major shareholders in the company and its associated corporations (IMAX Corporation), detailing the group's comprehensive remuneration policy and long-term incentive plans, including share option, RSU, and PSU schemes, designed to attract and motivate talent - Disclosures include shareholdings of directors, key executives, and major shareholders (IMAX Corporation and its subsidiaries) in the company[207][213] - The Group's remuneration policy aims to attract and retain talent by linking compensation to the Group's annual performance[215] - The Group has three long-term incentive sub-plans: Share Option Scheme, Restricted Share Unit (RSU) Scheme, and Performance Share Unit (PSU) Scheme[218][220] Long-Term Incentive Plan Details The group's long-term incentive plan comprises three sub-plans, with 654,265 unexercised share options, 1,793,004 unexercised RSUs, and 663,969 unexercised PSUs as of June 30, 2025, and 1,097,339 new RSUs and 180,930 new PSUs granted to directors, executives, and employees during the period Outstanding Equity Incentives as of June 30, 2025 | Plan Type | Outstanding Quantity | | :--- | :--- | | Share Option Scheme | 654,265 | | Restricted Share Unit Scheme | 1,793,004 | | Performance Share Unit Scheme | 663,969 | - For the six months ended June 30, 2025, the company granted 1,097,339 new Restricted Share Units (RSUs) and 180,930 new Performance Share Units (PSUs)[248][263] Interim Financial Information This section presents the interim financial statements, including the review report, condensed consolidated statements of comprehensive income, financial position, changes in equity, and cash flows, along with detailed notes on accounting policies, financial risk management, and related party transactions Review Report on Interim Financial Information PricewaterhouseCoopers has reviewed the group's interim financial information in accordance with International Standard on Review Engagements 2410, concluding that nothing came to their attention causing them to believe the interim financial information is not prepared in all material respects in accordance with International Accounting Standard 34 - PricewaterhouseCoopers, the auditor, has reviewed the interim financial information and issued a conclusion[278] - Conclusion: Nothing came to the auditor's attention causing them to believe the interim financial information is not prepared in all material respects in accordance with International Accounting Standard 34[280] Condensed Consolidated Interim Financial Statements This section presents the four core financial statements for the six months ended June 30, 2025: the statement of comprehensive income, statement of financial position, statement of changes in equity, and statement of cash flows, reflecting strong revenue and profit growth, expanded assets, and a healthy cash position Condensed Consolidated Interim Statement of Comprehensive Income (Thousand USD) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Revenue | 57,802 | 43,901 | | Gross Profit | 40,100 | 25,102 | | Operating Profit | 30,196 | 15,592 | | Profit for the Period Attributable to Owners of the Company | 23,893 | 12,648 | | Basic Earnings Per Share (USD) | 0.07 | 0.04 | Condensed Consolidated Interim Statement of Financial Position (Thousand USD) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | 358,266 | 333,573 | | Total Liabilities | 59,826 | 59,469 | | Total Equity | 298,440 | 274,104 | Condensed Consolidated Interim Statement of Cash Flows (Thousand USD) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 19,295 | 19,657 | | Net Cash Used in Investing Activities | (3,187) | (3,216) | | Net Cash Used in Financing Activities | (2,209) | (1,492) | | Cash and Cash Equivalents at End of Period | 94,172 | 77,457 | Notes to Condensed Consolidated Interim Financial Information These notes provide detailed explanations and supplementary information on accounting policies, financial risk management, significant accounting estimates, segment information, and various asset, liability, and profit/loss items, with a focus on revenue segment breakdown, financial risks (market, credit, liquidity), equity incentive accounting, and detailed related party transactions with IMAX Corporation - Financial Risk Management: The Group faces market risks (foreign exchange, interest rate), credit risk, and liquidity risk, with corresponding policies in place; credit risk includes concentration risk due to revenue and receivables from a few major customers[308][314] - Revenue and Segment Information (Note 7): Details revenue, cost, and gross profit for Content Solutions and Technology Products and Services segments; in H1 2025, revenue from two major customers each accounted for over 10% of total revenue[344][350][351] - Share-Based Payments (Note 16c): Discloses activity for options, RSUs, and PSUs under the China Long-Term Incentive Plan and IMAX Long-Term Incentive Plan, including outstanding at beginning, granted, vested, forfeited, and outstanding at end of period[369][372][376][383] - Related Party Transactions (Note 24): Quantifies various transactions with controlling shareholder IMAX Corporation, including cinema system purchases, film-related transactions, management fees, trademark and technology fees, and revenue sharing[415]