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Earnings Slow to a Crawl at IMAX China

Profits crawled ahead by just 1% and margins slipped at IMAX China, despite revenues bounding ahead by 26% in the first six months of the year.

A weak box office performance was blamed on exceptional comparisons. But IMAX China’s face was largely saved by a strong inflow of orders for new screens.

The company, which is a separate Hong Kong-listed subsidiary of IMAX Corp., recorded gross revenues of $55.1 million in the half, compared with $43.9 million in the comparable January to June period last year. Adjusted profits were $18.6 million, compared with $18.3 million.

The company’s Greater China box office was $180.5 million representing a 3% increase over the first half of 2015. In local currency terms its gross box office was up 10%. That was below the average for the market, which was up a reported 21%. The company did not have Chinese record-breaking movie “The Mermaid” in IMAX format. It also said that comparisons with a period that featured “Furious 7” were difficult. June was a strong month for the IMAX circuit with both “Warcraft” and “Independence Day: Resurgence” performing strongly in China.

Gross box office per screen dropped steeply, by 24%, from $811,000 to $615,000. In a conference call with financial analysts, Joseph Sparacio, IMAX Corp.’s chief financial officer & executive VP, said that Chinese per screen averages were still rich. In the second quarter they were $225,900 in North America, $325,300 in Greater China and $266,700 in other international sites.

IMAX China’s strength in the first half year came from having a greater than previous proportion of screens structured as revenue sharing joint ventures, and from new screen orders. The company has actively moved to convert several of its deals from sales type arrangements into revenue sharing terms.

In the first half IMAX China signed 79 new theater contracts which included 50 new full revenue sharing arrangements with existing clients Guangzhou Jinyi Media Corporation and Sichuan Lumiere Cinema.

That score exceeded the company’s 74 total signings for all of 2015 and its 40 total signings for all of 2014. IMAX’s backlog at 30 June 2016 increased to 264 IMAX systems, up from 217 at 30 June 2015.
On the conference call CEO of IMAX Entertainment, Greg Foster said that upcoming titles gave good reason for confidence.

“There are two particularly exciting (Chinese) titles at least again on paper. One is a movie called ‘Skiptrace’ that is a Jackie Chan movie, and then two weeks after that is a title called ‘Time Raider.’ Those are two titles that the marketplace seems quite looking forward to. We will be able to have ‘Tarzan’ interspersed in there. ‘Ice Age 5’ is coming soon. We just found out that ‘Star Trek’ will be coming in in early September.”

IMAX China stock was up by 6.7% at HK$43.1 per share at 1pm Thursday.

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