RHM.L Regulatory News (RHM)

RNS Number : 4758O

RedHot Media International Limited

30 June 2010

 

RedHot Media International Limited

('RedHot' or the 'Company')

 

Audited Financial Results

Year Ended 31 December 2009

 

30 June 2010

 

RedHot Media International Limited is pleased to announce its audited results for the 12 months ended 31 December 2009.

 

The Annual Report and Accounts of the Company and its subsidiaries (the "Group") will be posted to shareholders today and will be available shortly on the Company's website (www.redhot.asia).

 

 

The Group's summary of its financial results for 2009 are as follows:

 

·; Total revenue for 2009 increased by 17% to RM26.1 million (2008: RM22.4 million)

 

·; Gross profit improved by 21% to RM13.7 million (2008: RM11.3 million)

 

·; Gross margin improved to 52% (2008: 50%)

 

·; Profit before tax was RM4.7 million representing a 19% increase (2008: RM3.9 million)

 

·; Net profit improved by 18% to RM4.5 million (2008: RM3.8 million)

 

·; Basic earnings per share increased by 16% to 12.45 sen per share (2008: 10.73 sen per share)

 

·; Cash balances available for use at 31 December 2009 was RM2.3 million (31 December 2008: RM3.0 million)

 

·; Net assets of RM27.6 million at 31 December 2009 (31 December 2008: RM21.1 million)

 

Commenting on the financial results for the year, the Company's Chairman, Datuk Oh Chong Peng said:

 

Year 2009 has been one of the most challenging times that ever plagued the global economy and the global advertising and media sector was not spared from this challenge. I am pleased to report that the group has performed remarkably well despite the global economic downturn, with revenue growth of 17%.

 

Throughout the year, our clients and partners deserve praise for their continuous faith and support in our services. Our staff also deserve commendation for their hard work and commitment in overcoming these challenging times with the group.

 

In the earlier part of the year, the group underwent reorganization and integration of its acquired businesses with existing business operations in Malaysia, Beijing, Shanghai and Guangzhou. Managements' strategies to realign its business resources and cultivate the entrepreneurial spirit of its business managers have been effective and that has empowered the organization to seek increased business avenues.

 

Our acquisitions in Beijing and Shanghai presented equally promising growth and contributed to 33% of the group's revenue in 2009. The immediate establishment of business relationships with a large network of media partners and advertisers from these acquisitions have resulted in the group being able to carve for itself a share in China's lucrative markets.

 

Ausscar Group, our financial services marketing arm in Malaysia, also thrived with 12% contributions to the group's revenue in 2009. The management's strategy of aligning this business under the group has successfully led to the increase of advertising business from leading insurance companies in Malaysia.

 

Our resilience in this downturn is a testimony of the vigour of our people and attests to our business model, AxChange, which continues to show great potential with its increasing popularity amongst advertisers and media partners. We believe the group will continue to thrive amidst the recovering economy."

 

Group Managing Director, Mr. Cheong Chia Chieh summarized the operations of the Group as follows :

 

"Our results for the 2009 financial year strongly signifies the group's growth potential, the dynamism of our organization, and the resilience of our business. The group has seen healthy and steady growth in both revenue and profit figures year on year. We believe the positive results and growth in the business, positions the group for improved growth in the current financial year.

 

During the year under review, management focused on managing cashflow and maintaining sustainable organic growth against the backdrop of the economic downturn. The management and business managers are thanked for their acumen which helped us to withstand the tough economic climate. This focus resulted in management delaying the R&D of integrating its AxChange platform with its offices in China, which will now continue in the second half of 2010.

 

The group's strategies and efforts to realign its business resources and integrate the business functions of its offices in Malaysia and China have also seen positive results. The organization is now positioned with a dynamic and flexible structure that will allow its business to cross-sell services and help clients market themselves regionally.

 

We have also successfully penetrated China market's with our AxChange business and secured strategic participation from, amongst others, China's provincial television and China's leading mass transit digital media. Their mandates mark a strong growth indicator for our businesses both locally and regionally.

 

Ausscar Group continues to illustrate positive contribution to the group both qualitatively and quantitatively. Backed by Ausscar's strength in financial services marketing, leading insurance companies in Malaysia continue to renew and sign new contracts with larger advertising budgets.

 

2010 has started off well as the group continues to benefit from its strategic restructuring in the previous year.

 

Economic pressures and uncertainty in 2009 led management to focus on organic growth of its fundamental business in the media and advertising business. With stronger cashflow in 2010, AxChange research and development is anticipated to pick up again in the second half of 2010.

 

This year, we have been putting plans in place to develop new business avenues in industries that the Board believes will contribute significantly to top line figures and profit margins of the group. Management has identified 2 lucrative areas that it will venture into: out-of-home advertising and interactive advertising platforms that leverage on the Internet's booming opportunities in the social media sector.

 

The group had continued to seek growth through potential mergers and acquisitions in 2009, which was delayed by business-owners' uncertainty of the economic climate. However, negotiations with the identified M&A opportunities continued and has increased in pace during the beginning of 2010. Management expects to be more active through M&A in the second half of 2010.

 

We look forward to the year with greater enthusiasm and confidence."

 

 

 

RedHot Media International Limited
Cheong Chia Chieh	Tel: +601 2329 5522
Raymond Hor	Tel: +603 7651 0188
Allenby Capital Limited (Nominated Adviser and Broker)	Tel: +44 (0)203 328 5656
Nick Athanas James Reeve

 

 

Notes to editors:

 

Exchange rate: £1 = RM5.46

 

RedHot Media International Limited (AIM: RHM), is a Cayman Islands incorporated holding company. Its primary activity is that of a media broking group, including an innovative barter sales trading activity, in Malaysia and the major cities of the People's Republic of China ("PRC"), namely Shanghai, Beijing and Guangzhou.

 

A media broker conventionally purchases advertising space on behalf of its clients and earns commissions from the media providers based on the amount of advertising purchased. The AxChange business model adopts a pull marketing approach by aggregating demand from advertisers and consumers/merchants to generate additional sales for both the media owners and advertisers respectively.

 

RedHot also acts, to a lesser extent, as a non-stockholding distributor for certain clients (for whom it also acts as a media broker) with the intention of generating higher margins for the Group than would be obtained in conventional media buying.

 

Using this distribution based business model (AxChange), which the Directors aim to grow, RedHot enters into a contract to draw down various lines of inventory and then, as the inventory is sold through RedHot's distribution network, the proceeds from the sales are used to purchase media space for the same client.

 

The AxChange business model has been designed to free up working capital; allowing RedHot's customers to pay for advertising and assist new entrants into Malaysia & China (where capital controls are still in place) in selling their products using RedHot's established distribution network. RedHot also believes the model provides benefits to its distributors; providing them with lower unit prices and access to credit facilities to which they otherwise would not have access.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2009

		GROUP
	Notes	2009	2008
		RM'000	RM'000
Revenue		26,183	22,390
Cost of sales		(12,486)	(11,103)
Gross profit		13,697	11,287
Other income		136	177
Selling and distribution costs		(357)	(1,374)
Administrative expenses		(8,637)	(6,115)
Operating profit		4,839	3,975
Finance income		37	44
Finance costs		(177)	(79)
Profit before taxation		4,699	3,940
Taxation		(164)	(101)
Profit for the year		4,535	3,839
Other comprehensive income
Exchange differences on translating foreign operations		(157)	109
Total comprehensive income for the year		4,378	3,948
Profit Attributable to:
Equity holders of the company		4,516	3,882
Minority interests		19	(43)
		4,535	3,839
Total comprehensive income attributable to:
Equity holders of the company		4,359	3,976
Minority interests		19	(28)
		4,378	3,948
Earnings per share (Sen):	4
Basic		12.45	10.73
Diluted		12.28	10.69
Net dividend per share (Sen)		-	-

The results shown above relate entirely to continuing and acquired operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2009

				GROUP
	Notes		2009		2008
			RM'000		RM'000
ASSETS
Non-current assets
Property, plant and equipment			860		1,120
Intangible assets			4,425		3,815
Goodwill	5		14,569		13,857
Available-for-sale investments			26		25
			19,880		18,817
Current assets
Inventories			1,440		22
Trade and other receivables			22,430		15,814
Fixed deposits			1,577		3,043
Cash and cash equivalents			2,306		3,076
			27,753		21,955
TOTAL ASSETS			47,633		40,772
EQUITY AND LIABILITIES
Share capital			12,549		12,549
Share premium			3,339		3,101
Share-based payments reserve			2,210		2,210
Other reserves			(1,730)		(3,460)
Retained earnings			11,220		6,704
Shareholders' equity			27,588		21,104
Minority interests			34		15
Total Equity			27,622		21,119
Current liabilities
Trade and other payables			10,123		12,571
Bank overdrafts			2,379		2,844
Redeemable preference shares liability			280		-
Taxation payable			159		22
			12,941		15,437
Non-current liabilities
Provision for deferred consideration			4,510		4,210
Redeemable preference shares liability			2,560		-
Deferred taxation			-		6
			7,070		4,216
Total liabilities			20,011		19,653
TOTAL EQUITY AND LIABILITIES			47,633		40,772

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2009

		GROUP
		2009	2008
		RM'000	RM'000
Cash flows from operating activities
Group profit before taxation		4,699	3,940
Adjustments for items not requiring an outflow of funds:
Loss on disposal of fixed assets		34	90
Depreciation and amortization		1,336	1,096
Operating profit before changes in working capital		6,069	5,126
Changes in working capital:
Increase in inventories		(1,418)	(11)
Increase trade and other receivables		(6,616)	(1,837)
(Decrease)/increase in trade and other payables		(1,030)	165
Income taxes payable		(27)	(79)
Net cash (used in)/from operating activities		(3,022)	3,364
Investing activities
Withdrawal/(placement) of fixed deposits		1,466	(1,543)
Cash acquired on acquisition of subsidiaries		-	319
Investments for subsidiaries		(500)	-
Purchases and development of software		(1,707)	-
Proceeds from disposals of property, plant and equipment and software		115	47
Purchase of fixed assets		(138)	(3,164)
Net cash used in investing activities		(764)	(4,341)
Financing activities
Proceeds from issue of preference shares		3,540	-
Proceeds from issue of ordinary shares		-	48
Net cash from financing activities		3,540	48
Decrease in cash and cash equivalents		(246)	(929)
Effects of foreign exchange rate changes		(59)	94
Cash and cash equivalents at 1 January		232	1,067
Cash and cash equivalents at 31 December		(73)	232

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

	Share	Share	Share	Other	Retained	Minority	Total
	Capital	Premium	Based	Reserves	Earnings/	Interests	Equity
			Payments		(Losses)
	RM'000	RM'000	RM'000	RM'000	RM'000	RM'000	RM'000
Year ended 31 December 2009
At 1 January 2009	12,549	3,101	2,210	(3,460)	6,704	15	21,119
Discount on share issue expenses incurred in prior year	-	238	-	-	-	-	238
Redeemable convertible preference shares - equity component	-	-	-	1,887	-	-	1,887
Total comprehensive income for the year	-	-	-	(157)	4,516	19	4,378
At 31 December 2009	12,549	3,339	2,210	(1,730)	11,220	34	27,622

 

 

	RM'000	RM'000	RM'000	RM'000	RM'000	RM'000	RM'000
Year ended 31 December 2008
At 1 January 2008:
RedHot Media Group	5,030	2,970	-	41	2,822	1,043	11,906
Shares issued prior to business combination:
Company - on incorporation	-	-	-	-	-	-	-
RedHot Media Group	1,039	11,207	-	-	-	(1,000)	11,246
Shares issued for business combination	12,501	11,928	-	-	-	-	24,429
Adjustment for business combination	(6,069)	(14,177)	-	(4,183)	-	-	(24,429)
At 21 September 2008 - following business combination	12,501	11,928	-	(4,142)	2,822	43	23,152
Cost of share issues	-	(6,617)	-	-	-	-	(6,617)
Shares issued on exercise of share options	48	-	-	-	-	-	48
Share-based payment charge	-	(2,858)	2,858	-	-	-	-
Transfer on exercise of options	-	648	(648)	-	-	-	-
Contingent consideration	-	-	-	588	-	-	588
Total comprehensive income for the year	-	-	-	94	3,882	(28)	3,839
At 31 December 2008	12,549	3,101	2,210	(3,460)	6,704	15	21,119

 

 

The group's other reserves comprise the following:

 

	2009 RM'000		2008 RM'000
Pooling of interests reserve	(4,183)		(4,183)
Contingent consideration to be settled by the issue of shares	588		588
Redeemable convertible preference shares - equity component	1,887		-
Currency translation reserve	(22)		135
	(1,730)		(3,460)

Notes to the Results for the Financial Year Ending 31 Dec 2009

 

 

1. General information

 

RedHot Media International Limited is listed on the Alternative Investment Market ("AIM") of the London Stock Exchange.

 

The Group's financial statements for the year ended 31 December 2009, from which this financial information has been extracted, and for the comparative year ended 31 December 2008, are prepared on a going concern basis and in accordance with IFRS.

 

The financial information contained in this announcement does not constitute full statutory accounts. The figures are extracted from the financial statements for the year ended 31 December 2009, which have been agreed with the company's auditors and will be sent to shareholders and will be available on the Group's website at www.redhot.asia. The auditors have reported on those accounts and their reports were unmodified. 

 

This information consolidates the accounts of RedHot Media International Limited and all of its subsidiary undertakings draw up to 31 December each year.

 

2. Accounting policies

 

The accounting policies applied are consisten with those adopted and disclosed in the group financial statements for the year ended 31 December 2009.

 

3. Segmental Reporting

 

For the purposes of presenting segment information, the activities of the group are divided into operating segments in accordance with the rules contained in IFRS 8 'Operating Segments'. Operating segments are identified on the same basis that is used internally to manage and report on performance and takes account of the organizational structure of the group based on the various services of the reportable segments. The activities of the group are broken down into the operating segments advertising, financial services and other entities.

 

The advertising segment connects advertisers and media owners and places advertisements for its clients. The financial services segment market insurance and financial products and services and provide advisory services. The ultimate holding company is included in the other entities segment. Eliminations comprise the effects of eliminating business relationships between the operating segments. Internal management and reporting segment information is prepared in conformity with the accounting policies adopted for preparing and presenting the group financial statements. There was no change in accounting policies compared to previous periods. Inter-segment receivables and payables, provisions, income, expenses and profits are eliminated in the column "eliminations". Inter-segment sales take place at arm's length prices. The role of "chief operating decision maker" with respect to resource allocation and performance assessment of reportable segments is embodied in the full Board of Directors. In order to assist the decision making process, various measures of segment result and of segment assets have been set for the different operating segments. The advertising, financial services and other entities segments are managed on the basis of the profit after taxation. Capital employed is the corresponding measure of segment assets used to determine how to allocate resources. Total assets are used as the basis for assessing the allocation of resources.

 

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that is different from those of segments operating in other economic environments. The group's operating businesses are organised and managed separately according to the nature of products produced and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. In the directors' opinion the group has the following segments:

 

Business segments - two business segments, which are advertising and financial services.

 

Geographical segments - two geographical segments, which are i) Malaysia; and ii) China & Hong Kong.

 

The segment results for 2009 were as follows:

 

	Advertising & Media		Financial Services	Central & Other	Total
	RM’000		RM’000	RM’000	RM’000
Segment Revenue
Revenues from external customers	23,434		3,198	(449)	26,183
Segment Results
Profit from operations	4,527		805	(493)	4,839
Net finance costs					(140)
Profit before tax					4,699
Income tax expense					(164)
Profit for the year					4,535
Segment Assets
Segment assets excluding goodwill and intangible assets	25,797		2,842	-	28,639
Goodwill					14,569
Other intangible assets					4,425
Total Assets					47,633
Segment Liabilities	18,585	1,426		-	20,011
Other segment information
Capital expenditure
Property, plant and equipment	138		-	-	138
Intangible assets	1,707		-	-	1,707
	1,845		-	-	1,845
Depreciation and amortisation
Depreciation	190		53	-	243
Amortisation	1,093		-	-	1,093
	1,283		53	-	1,336

 

 

 

Major customers

 

One customer represented more than 10% of total group revenues during the year. The advertising and media segment had one customer that represented 16% of that segment's total revenues.    

 

The segment results for 2008 were as follows:     

 

		Advertising & Media	Financial Services	Central & Other	Total
		RM’000	RM’000	RM’000	RM’000
Segment Revenue
Revenues from external customers		21,720	670	-	22,390
Segment Results
Profit from operations		3,831	604	(460)	3,975
Net finance costs					(35)
Profit before tax					3,940
Income tax expense					(101)
Profit for the year					3,839
Segment Assets
Segment assets excluding goodwill and intangible assets		19,454	3,646	-	23,100
Goodwill					13,857
Other intangible assets					3,815
Total Assets					40,772
Segment Liabilities		17,888	1,590	175	19,653
Other segment information
Capital expenditure
Property, plant and equipment		784	-	-	784
Intangible assets		2,380	-	-	2,380
		3,164	-	-	3,164
Depreciation and amortisation
Depreciation		240	-	-	240
Amortisation		852	-	4	856
		1,092	-	4	1,096

 

 

 

 

Geographical information

	2009	2008
	RM'000	RM'000
Revenues from external customers
Malaysia	20,714	19,729
China and Hong Kong	5,469	2,661
	26,183	22,390
Non-current assets
Malaysia	9,758	8,160
China and Hong Kong	10,122	10,657
	19,880	18,817

 

 

4. Earnings per share

 

 

The basic earnings per ordinary share has been calculated using the profit for the financial year attributable to the company's equity shareholders of RM4,516,000 (2008: RM3,882,000) and the weighted average number of ordinary shares in issue of 36,269,727 (2008: 36,172,521).

 

For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares in issue during the financial year have been adjusted for the dilutive effects of all potentially dilutive ordinary shares, i.e. share options in issue at 31 December 2009, which has resulted in a weighted average number of shares in issue and to be issued of 36,779,789.

 

5. Goodwill

 

Group

2009 2008

RM'000 RM'000

Cost

At 1 January 13,857 2,205

Additions 800 11,652

Exchange adjustments (88)

________ ________

 

At 31 December 14,569 13,857

======= =======

 

Additions to goodwill in 2009 arose from the additional deferred contingent consideration on the acquisition of Ausscar Group comprising RM500,000 paid in 2009 and RM300,000 deferred contingent consideration estimated to be payable in the future.

 

Additions to goodwill in 2008 arose on the acquisition of the following:

 

a) RM1,922,000 on the acquisition of the Ausscar Group; and

b) RM9,730,000 on the acquisition, by RedHot Media International (China) Ltd, of certain business assets of China MediaMart Information Technology Co. Ltd ("CMIT"), China MediaMart Advertising Co. Ltd. ("CMAD") and In Motion Media & Ad Co. Ltd ("IMM").

 

Goodwill acquired in business combinations is allocated, at acquisition, to the cash generating units ("CGUs") that are expected to benefit from the business combinations. The carrying amount of goodwill has been allocated as follows:

RM'000

 

CMAD and CMIT businesses 4,849

IMM Business 4,792

Ausscar Group 2,723

RedHot Media Sdn Bhd 2,205

_______

 

14,569

======

 

Deferred consideration is payable on acquisitions based on future profit targets being reached by each business over the period 2008 to 2011. On the acquisition of the Ausscar group and CMAD & CMIT future consideration is payable as cash and for IMM future consideration is payable as a combination of both shares and cash. Based on currently estimated future expectations the directors are recognising the following as deferred consideration at 31 December 2009:

 

a) On the acquisition of CMAD & CMIT - RM1.32 million in cash

b) On the acquisition of IMM - RM2.89 million in cash and RM588,000 as shares to be issued in Red Hot Media International Limited

c) On the acquisition of the Ausscar Group - RM300,000 in cash

 

The total provision for deferred contingent consideration is therefore RM4,510,000 and the RM588,000 is included within the group's other reserves for contingent consideration expected to be settled by the issue of shares.

 

The group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.

 

The recoverable amounts of the CGU's are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the forecast period. Management estimated the discount rates of 10% that reflect current market assessments of the time value of money and the risks specific to the CGU's. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

 

 

-ends-

 

 

 

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