REVENUE AT 30 SEPTEMBER 2014: €107.8m ON A PRO FORMA BASIS, up +14.6%
YMAGIS (ISIN: FR0011471291, mnemonic: MAGIS), the specialist in digital technologies for the cinema industry, today published its consolidated revenue figures as at 30 September 2014.
The third quarter saw the acquisition of the Belgian company dcinex, which was completed on 20 October and will be included in the group’s consolidated financial statements from fourth quarter 2014. However, in order to provide an insight into the new entity’s activity before then, a pro forma(1) revenue chart is presented in addition to the YMAGIS chart for the third quarter and the first nine months of the year.
1. PUBLISHED CONSOLIDATED REVENUE (excluding dcinex)
Excluding dcinex, which will be consolidated on fourth quarter 2014, YMAGIS’ third-quarter consolidated revenue was up 17.5% to €11.8m as at 30 September 2014. Consolidated revenue for the first nine months of the year was €41.9m, a 39.4% increase on the same period the previous year.
Note that in the first half of 2014, the completion of the roll-out of the VPF system generated non-recurring income associated with the sale of digital projection equipment of €7m, which will not be repeated in 2015. Excluding these sales, revenue growth nevertheless remains strong, increasing 20.3% over the year to 30 September 2014.
The VPF division recorded a 3.0% increase in revenue to €7.3m in the third quarter. Over nine months, VPF revenue rose 12.2% to €22.2m.
The Services division posted revenue growth of 51.7% in the third quarter and 91.7% over nine months. Stripping out equipment sales related to the VPF roll-out (see above), Services revenue rose 38.2% over the year to 30 September 2014. As anticipated, revenue from the Sales and installation business, which accounted for 10% of total revenue in the third quarter, fell 9.3% to €1.2m in Q3 owing to the completion of the digitisation cycle for cinemas in Europe. However, equipment sales in the first half following completion of the VPF roll-out in Spain and Germany offset this fall and led to a 116.3% increase in Sale and installation revenue to €10.4m over nine months.
The Digital Lab business showed an increase of 166.0% to €2.4m in the third quarter and 103.1% to €6.3m in the year to 30 September. This was mainly due to the consolidation of the SmartJog business on 1 December 2013 and the Arqiva network of connected cinemas on 1 April 2014. Investments related to the roll-out of this activity continued in the third quarter and are not expected to be absorbed by revenue growth before 2015.
Online Support and Maintenance revenue came in at €0.9m in the third quarter and €2.8m at 30 September, up 18.9% and 20.4%, respectively. This growth was driven by the increase in the number of VPF screens in operation.
2. PRO FORMA REVENUE(1)
Including the activities of dcinex over the period, which led to multiplying revenues by three, YMAGIS posted consolidated pro forma revenue(1) of €33.9m (+5.7%) for the third quarter of 2014 and €107.6m (+14.8%) for the year to 30 September 2014. Excluding non-recurring sales related to the completion of the VPF roll-out (see above), pro forma consolidated revenue(1) rose 8.5% in the year to 30 September 2014.
The tie-up with dcinex was an opportunity for the Group to reclassify the activities of the Services division into two segments to provide greater clarity:
- Services for exhibitors, consisting of equipment Sales and installation activities and Online Support and Maintenance activities;
- Services for distributors and content producers, formerly "Digital Lab", consisting of Duplication and Delivery of digital content and Post-production activities.
VPF(2)revenue slowed in the third quarter due to non-recurring effects
The VPF division (47.5% of pro forma cumulative revenue(1)) continued to grow and recorded pro forma(1) revenue of €17.4m in the third quarter, an increase of 9.4%. In the year to 30 September, pro forma(1) revenue grew 14.0% to €51.1m.
This progress reflects the increase in the number of cinema theatres operated by the Group under VPF contracts at the end of 2013, which for most European countries marked the end of the cycle of mass digitisation of cinemas. Since the end of 2013, the number of cinemas operated by the Group under VPF contracts has reached 5,780 in 12 European countries.
However, VPF revenue growth slowed in the third quarter due to the following factors:
- an unfavourable comparison basis in Q3 2013, which included non-recurring factors that were not repeated in Q3 2014. As a result, YMAGIS (excluding dcinex) recorded strong growth in its VPF business in Q3 2013, with revenue 35.8% higher than in the third quarter of 2012.
- a decline in the turnover of films in theatres coinciding with the Football World Cup in early July, limiting the number of VPFs billed during the period;
Exhibitors’ services show strong revenue growth despite the completion of the digitisation cycle in Europe
The Exhibitors’ services segment showed a decline of 5.8% to €13.4m in the third quarter of 2014 but was up 11.1% to €47.7m as at 30 September 2014. Business activities focusing on exhibitors showed mixed performances, mainly as a result of the completion of the VPF roll-out in Europe.
Pro forma(1) revenues from the equipment Sales and installation business rose 10.4% to €40.0m as at 30 September 2014. Despite a 9.5% contraction in business in the third quarter following the completion of the digitisation cycle in the majority of European countries, revenue remained robust, underpinned by the opening of new cinemas, the adoption of new technologies (4K projection, immersive/3D sound) and the digitisation of cinemas in countries that are lagging in the cycle.
Pro forma revenue(1) from the Online Support and Maintenance business stood at €7.1m as at 30 September 2014 (+12.1%), reflecting the positive full-year effect of cinemas operated under VPF contracts during 2013.
Sharp increase in revenues from services for distributors and content producers
Revenue from the Services to distributors and content producers segment rose 61.2% to €3.1m in the third quarter of 2014 and 47.1% to €8.9m in the first nine months of the year. This reflected strong performances from both the Delivery and the Post-production businesses.
Pro forma(1) revenue from the Delivery business was up 101.4% to €2.4m in the third quarter of 2014 and up 48.8% to €6.4m as at 30 September 2014. Third-quarter business benefited from the respective contributions of SmartJog (consolidated as of 1 December 2013) and Arqiva's network of connected cinemas (consolidated as of 1 April 2014). This does not include revenue from DSAT, a satellite content provider, which is 49.8% owned by dcinex and 50.2% owned by Eutelsat and is consolidated by the equity method.
Cumulative pro forma(1) revenue from the Post-production business rose 50.8% to €1.9m, helped by strong performances from the Paris and Barcelona digital labs opened in July 2013.
Distributors’ and content producers’ services revenues benefited from the significant investments made in late 2013 and the first half of 2014 and the strengthening of the SMARTJOG YMAGIS Logistics teams, which have grown from 11 team members on 30 September 2013 to 40 on 30 September 2014. This ramp up in marketing and technological power will continue to weigh on second-half results and will only start making a positive contribution to the Group’s results from 2015 onwards.
Overall, the Services division (52.5% of pro forma(1) cumulative revenue) recorded pro forma(1) revenue of €16.5m in the third quarter of 2014, an increase of 2.1%. In the year to 30 September 2014, pro forma(1) revenue was up 15.5% to €56.5m.
The change in scale brought about by YMAGIS’ acquisition of the Belgian company dcinex in the third quarter of 2013 has transformed the structure of the Group which triples in size and becomes Europe’s leader in digital technologies for the cinema industry. The formation of the new entity, for which integration is already underway, offers new opportunities that are set to materialise in the fourth quarter.
In terms of the VPF business, for instance, after 1 January 2014 YMAGIS was no longer able to offer VPF contracts. However, in October 2014, dcinex signed a number of new contracts under the VPF model with Greece and Turkey, which were lagging other European countries in terms of digital roll-out. These contracts will start making a contribution from the fourth quarter in terms of sales and installation of digital projection equipment.
The outlook for Services activities, for both exhibitors and content producers, is also favourable thanks to the following:
- The sustained momentum created by the European digital labs;
- The investments made at the end of 2013 and in 2014, having led to the establishment of the largest European network for the digital delivery of content, which will generate significant potential in terms of revenue from content distributors, particularly the US majors;
- The launch of new technologies including the commercial launch of the Music software solutions and Orchestra server.
(1) Pro forma revenues are based as if dcinex acquisition was carried out as at 1 January 2013
(2) VPF: Virtual Print Fee – fee paid to YMAGIS Group by the supplier of digital content, mainly the distributors of long features, in order to allow the projection of this content in a theater under VPF contract with YMAGIS Group, regardless of the equipment financing model chosen by both parties (Third-Party Investors –financing carried out by YMAGIS Group- or Third-Party Collector –financing carried out by the exhibitor-). The VPF collection makes it possible to cover a significant part of the financing of digital projection equipment, the balance being supported by the exhibitor under contract with YMAGIS Group.
(3) DCP: Digital Cinema Package - group of digital files comprising feature-length films, trailers and commercials, or any other content shown via a digital projector.
(4) KDM: Key Delivery Message, or contents’ unlocking key. The distributor sends an electronic message to the exhibitor, containing the key enabling the digital copy (or DCP) to be played.