China Literature (772) H2 2020 earnings summary

Executive summary

• Strategic shift from digital reading toward an IP-centered entertainment ecosystem spanning literature, comics, animation, film, TV and games; H2 performance rebounded after operational and pandemic challenges.

• FY2020 revenue rose 2.1% YoY to CNY 8.5B; IFRS net loss was CNY 4.5B, largely due to New Classics Media-related losses, while non-IFRS net profit was CNY 901M.

Financial highlights

• Online business revenue increased 32.9% YoY to CNY 4.9B, or 57.9% of revenue versus 44.5% in 2019; IP operations and other revenue fell 22.5% to CNY 3.6B.

• Gross profit grew 14.7% to CNY 4.2B; gross margin was 49.7%, up from 44.2% in 2019.

• Operating loss and IFRS net loss were each CNY 4.5B; non-IFRS operating profit was CNY 935M and non-IFRS net profit CNY 901M.

• H2 revenue was CNY 5.3B, up 62% from H1; H2 net profit was CNY 895M, versus FY net profit attributable to equity holders and non-IFRS measures of CNY 917M as cited in prepared remarks.

Outlook and guidance

• 2021 priorities include growing free-reading users, improving retention and content quality, and using online reading to expand the audience and support long-term IP operations.

• Expected 2021 releases include six to eight TV series and over 100 comics; a three-year target is 300 comics.

• Joy of Life game was expected to launch in 2021; plans also include broader game partnerships and adaptations across MMORPG, SLG and other genres.

• Management expects IP incubation and cross-format adaptation to become growth drivers, while emphasizing long-term sustainable development rather than near-term performance.