Imax China’s first-half profit drops 7.1 per cent as China’s box office growth cools

The Hong Kong-listed provider of Imax theatre systems for cinemas in China reported first-half net profit of US$16.5 million

PUBLISHED : Thursday, 27 July, 2017, 11:06am
UPDATED : Thursday, 27 July, 2017, 10:33pm

Imax China Holdings, the Hong Kong-listed provider of Imax systems for cinemas in China, posted a 7.1 per cent fall in net profit for the first half, as it continued to be hurt by sluggish demand from operators amid slow ticket sales.

The company announced on Thursday that first-half net profit was US$16.5 million for the six months to June 30. The result was below analysts’ consensus estimates of US$17 million, according to Bloomberg.

Revenue fell 6.3 per cent to US$51.6 million, compared to US$55 million over the same period in 2016, according to the company’s filing to the Hong Kong stock exchange.

Imax China’s shares fell 1.8 per cent to HK$21.40 at the close of Hong Kong trade on Thursday.

Having had a presence in greater China for more than 15 years, the exclusive licensee of the Imax brand generates revenue by charging fees to exhibitors for the Imax theatre system and associated services, brand and technology licensing and maintenance services, as well as sharing a fixed percentage in its studio partners’ box office generated from films processed by the company.

Ray Zhao, an analyst at Chinese brokerage firm Guotai Junan Securities, said the outlook for Imax China in the second half remained difficult.

“We actually had predicted the earnings results of the company to be positive previously, as we have seen several Hollywood blockbusters screened in cinemas for the first half,” Zhao said.

“If they could not gain profit with such a strong setting, it would seem a bit worrying for their profit prospect for the second half,” he said.

Analysts from HSBC last week cited downside risks in the form of slower Imax screen expansion amid a cooling in the pace of new shopping mall openings, customer concentration in Wanda, as well as competing technologies such as Dolby Cinema.

“We see limited 5 per cent downside even assuming Wanda completely stops expansion under our bear case,” HSBC analysts Gary Yu, Ansel Lin and Yang Liu wrote in the note.

The fall in the company’s profit did not come as a big surprise, as the once booming Chinese box office has seen lacklustre growth in ticket revenue during the first half, with takings of 25.5 billion yuan (US$3.7 billion), compared to 24.6 billion yuan over the same period last year, according to research firm Ent Group.

Last year, box office receipts grew less than 4 per cent, compared to an annual average of 35 per cent over the last five years.

The Shanghai-based subsidiary of Imax Corp – which has its major operations in New York, Toronto and Los Angeles, is a long-time partner with Wanda Cinema Line, an entertainment subsidiary under property developer Dalian Wanda Group.

Wanda Cinema Line has signed numerous revenue-sharing agreements with the Imax China since 2007, opening hundreds of Imax theatres across China’s smaller cities in an effort to tap the fast growth of the middle class.