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Hong Kong company reporting season

Visual effects firm Digital Domain eyes new China projects for growth as losses widen

PUBLISHED : Wednesday, 31 August, 2016, 9:04pm
UPDATED : Thursday, 01 September, 2016, 6:55am

Digital Domain Holdings, which operates the world’s largest independent visual-effects company, plans to tap into major new projects in greater China’s media entertainment market after posting a wider net loss in the first half of this year.

Daniel Seah Ang, chief executive at Digital Domain, said in a regulatory filing on Wednesday that the company will also “seek opportunities for financing and collaboration with strategic partners” to help bolster its business.

The company reported an interim net loss of HK$158.88 million, compared with a HK$76.39 million deficit in the same period last year.

It said the shortfall this year was caused by several factors, including the recognition of HK$41.54 million in granted share options, amortisation and depreciation expenses, interest expenses for convertible notes, increased administrative and operating costs, and operating losses from its media entertainment business.

Revenue, however, grew 19 per cent to HK$348.13 million, up from HK$293.49 million a year earlier.

US subsidiary Digital Domain 3.0, which runs the Hong Kong-listed parent’s main visual effects production business, booked revenue from several high-profile projects in the first half.

These included Hollywood films Deadpool, X-Men: Apocalypse and Independence Day: Resurgence, as well as marketing campaigns for Nike and Pokemon Go.

Virtual reality in China will experience explosive growth in 2016 amid an increasingly enriched content ecosystem
Neo Zheng, IDC analyst

Seah said the company has adopted “cost-control measures – including outsourcing, where appropriate, discreet parts of its visual effects work to external vendors and minimising the number of unutilised production employees”.

In July, Seah said the firm was pursuing more virtual reality content partnerships in greater China to add to its recent alliances with Alibaba Group-backed online video service Youku Tudou and highly diversified digital entertainment provider Leshi Internet and Information Technology.

New York-traded Alibaba is the owner of the South China Morning Post.

“Virtual reality in China will experience explosive growth in 2016 amid an increasingly enriched content ecosystem,” IDC analyst Neo Zheng said in a report.

In January, Digital Domain established a new subsidiary called DDPO, which is responsible for growing its visual special effects, computer graphics, virtual reality, 360 panorama video recording and digital human rendering services for mainland Chinese cinema, television, commercial advertising, concerts and sports events.

Shares of Digital Domain rose 3.03 per cent to close at 51 Hong Kong cents in trading on Wednesday.