RHM.L Regulatory News (RHM)

Resource Holding Management Limited

("Resource Holding Management" or "RHM" or the "Company")

Audited financial results for the year ended 31 December 2013

27 June 2014

Resource Holding Management is pleased to announce its audited results for the 12 months ended 31 December 2013.

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).

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

"I am very pleased to present to you RHM's annual report and accounts for FY2013.

FY2013 has been a challenging year due partly to intensified competition in the media and advertising sector in the region in which the Group operates. The Group registered increased revenue of 8 percent on the previous financial year ("FY2012") as well as a decline in net profit margin of 10 percent over the same period. In spite of the challenges faced by the Group from intensified regional competition, the Board expects improved profitability in the coming years to be achievable as more existing and potential clients are backed by a much larger clientele base which, in turn, is expected to place digital options more firmly in their communications plans. The Group sees opportunities to position itself strategically to emerge with more innovative digitally related creative, media and marketing solutions for its clients.

In 2013, the Group sought to develop a competitive advantage by enhancing its efforts to provide a turnkey solution for its clients. In a world that is becoming increasingly digital, the Group's strategy is to deliver individuals and companies seamless and innovative advertising, media or marketing solutions through a variety of technological platforms and mediums.

The transaction with PUC Founder (MSC) Berhad ("PUCF") completed in January 2014 following which RHM are interested in 62.48% of the issued share capital of PUCF. The Group expects improved financial performance as a result of the enlarged asset base and profit contribution from the enlarged group.

The Board remains assured that the Group's strategy will continue to generate sustainable returns for shareholders by providing innovative and forward thinking solutions in the advertising and media space to customers.

I would like to take this opportunity to thank the Board of Directors for their strategic advice, management and employees for their commitment and hard work, customers and business partners for their loyal support, and shareholders for your faith in the Group.

I am confident that the Group has the right strategy, people and resources to continue to deliver sustainable and equitable growth in the years ahead."

DATUK OH CHONG PENG

Non-Executive Chairman

27 June 2014

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

Business performance for the Group continued to perform well for the year 2013.

Financial highlights

It gives me great pleasure to present our financial highlights for the 2013 financial year:

· Total revenue for 2013 increased 8 percent to RM49.1 million (2012: RM45.6 million)

· Gross profit remained steady at RM19.2 million (2012: RM19.2 million)

· Gross margin reduced to 39 per cent. (2012: 42%)

· Profit before tax was RM6.1 million (2012: RM9.9 million)

· Net profit was RM6.0 million (2012: RM10.1 million)

· Net profit margin decreased to 12 per cent. (2012: 22%)

· Basic earnings per share decreased by 43.5 percent to 14.61 sen per share (2012: 25.90 sen per share)

· Cash balances available for use after deducting bank overdraft as at 31 December 2013 was RM3.1 million (31 December 2012: RM2.3 million)

· Net assets were RM147.1 million at 31 December 2013 (31 December 2012: RM62.0 million)

Business during the year

Amidst a challenging market outlook, the Group registered increased revenue, however, experienced a decline in net profit margins from 22 percent to 12 percent. The fall in net profit margin was largely expected due to declining market demand. The strategy in 2013 was to deliver better services to clients by offering more innovative products and I am confident that the Group delivered such an offering.

Notable Client Wins

In 2013, Shanghai's business activities continued to expand with the Hangzhou Tourism Project to promote Hangzhou as a tourist destination for holidaymakers from Singapore, Malaysia, Thailand, Hongkong. Since then, Hangzhou tourism has gained popularity across the region. Notably, South Korea has been added to RHM's mandate going forward for year 2014.

The Group continues to deliver cross-border advertising and media services to attain strategic market reach. The long term strategic relationship with the Hangzhou Tourism Ministry will enable continuous bilateral trade in the media industry in China and the South East Asian markets.

In Malaysia, the Group has worked hard to drive the growth in its customer base throughout all divisions of the Group's businesses. The notable clients we have worked with in 2013 include among others Andaman Property Management Sdn Bhd, Bella Infusion Sdn Bhd, HCK Capital Sdn Bhd, LBS Bina Holdings Sdn Bhd, OSK Property Holdings Bhd, See Hoy Chan Sdn Bhd, Titijaya Asset Sdn Bhd and Wing Hin Motor Sdn Bhd.

The clients who increased their advertising spend in 2013, compared to 2012, included Astana Modal Sdn Bhd, Group Associated (C&L) Sdn Bhd, Luxor Beauty World, Singer (Malaysia) Sdn Bhd, Selat Makmur Sdn Bhd, V Two Sdn Bhd, Wyann International (M) Sdn Bhd, 7-Eleven Malaysia Sdn Bhd, Erican Language Centre Sdn Bhd and Cergas Asal Sdn Bhd.

Shareholder value

Creating long term shareholder value has always been one of the Group's main priorities. Despite market uncertainty due to fluctuations of economic performance, the Group aims to enhance shareholder value by delivering consistent financial performance through its current operations and, where appropriate, by identifying and investing in businesses which complement the Group's existing businesses.

Strategic corporate developments

PUC Founder

I am pleased that the disposal of the entire issued share capital of the Company's subsidiary, Red Media Asia Limited, including all operating subsidiary companies to PUC Founder (MSC) Berhad (listed on the Malaysian Stock Exchange Bursa Malaysia Securities Berhad) was successfully completed in January 2014. The completion of this exercise has resulted in RHM holding a 62.48% stake in PUCF.

The Group continues to explore opportunities with PUCF through its presence in China. This exercise has been advantageous to the Company in its strategic positioning in the Chinese market.

Going forward, the Group intends to focus on three key growth areas in media and advertising services: e-content, online to offline ("O2O") social media and e-payment.

e-Content - e-Content includes e-library, e-publication technology and e-books. Revenues can be generated from sales or subscriptions to users and digitisation of libraries of academic institutions and government sectors. Advertisements can be incorporated into e-books and the e-library and e-publication platforms to create a significant secondary stream of revenue for content providers. The Group believes that there is a good business opportunity in the Asian market for e-Content primarily due to a lack of content in local languages. The Group believes it is well poised to provide e-Content services in local languages due to its regional presence is comfortable operating.

Online to offline ("O2O") social media - is a social media platform thatenables interactive communication between merchants and end users. It collects and provides business intelligence on users and enables merchants to direct creative advertising and shopping information to target users. The Group believes this approach makes advertising more effective than traditional methods.The Group plans to invest into further enhancements in its existing system through technology acquisition or joint venture arrangements to complete the platform capabilities and also to cater for cross region applications.

e-Payment - The widespread use of online shopping and banking has created a major market for e-commerce payment systems. The e-commerce payment is facilitated by electronic payment systems, which includes different kinds of non-cash payment transactions such as credit card, debit card or electronic fund transfers. Moving forward, the Group intends to partner with an international e-payment service provider to offer e-payments to provide a more flexible and mobile system, but yet faster, more secured and transparent, to users worldwide.

2014

The Group remains optimistic about the outlook for 2014 and is confident that the Group will be able to capitalise on digital opportunities within the media and advertising business segment.

I am confident that 2014 will be a significant year for the Group's expansion into digital media and the Group will be well positioned to expand into other South East Asian markets as well as leverage its existing merchant database in Malaysia.

The Group has will leverage on its cooperation with one of its key shareholder, Peking University Founder Group, one of the leading providers of digital publishing technology, products and services in China.

We will continue to seek investment and business acquisition that will generate recurring income and enlarge our market share.

We are confident that 2014 will be an improved year for the Company.

CHEONG CHIA CHIEH

Group Managing Director

27 June 2014

Notes to editors:

Exchange rate: £1 = RM5.41

Resource Holding Management 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.

RHM 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, RHML enters into a contract to draw down various lines of inventory and then, as the inventory is sold through RHM'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 RHML'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 RHML's established distribution network. RHM 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.

STATEMENTS OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

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

STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER 2013

STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The group's other reserves comprise the following:

COMPANY STATEMENT OF CHANGES IN EQUITY

Notes to the Results for the Financial Year Ended 31 Dec 2013

1.1 Basis of preparation financial statements

The Group's consolidated financial statements for the year ended 31 December 2013, from which this financial information has been extracted, and for the comparative year ended 31 December 2012 are prepared on a going concern basis and in accordance with IFRS as adopted by the EU ("IFRS").

The financial information set out in this preliminary announcement does not constitute "a complete set of financial statements" as defined in IAS1 Presentation of financial statements but it is derived from those accounts. The financial information for the year ended 31 December 2012 is derived from the financial statements for that year which were issued to shareholders on 28 June, 2013. The auditors reported on those accounts; their report was unqualified. The consolidated statement of financial position at 31 December 2013, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related notes for the year then ended have been extracted from the Group's 2013 financial statements upon which the auditor's opinion is unqualified.

The announcement has been agreed with the company's auditor for release.

The financial statements are presented in Malaysian Ringgits and all values are rounded to the nearest thousand Ringgits (RM'000) except when otherwise indicated. The exchange rate of Malaysian Ringgit to Pounds Sterling at 31 December 2013 was £1: RM5.41 (RM1: £0.20) (2012: £1: RM4.94, RM1: £0.20)

1.2 Segmental reporting

The activities of the group are divided into operating segments in accordance with the requirements of 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 three operating segments: advertising, financial services and other entities. The advertising segment is involved in the advertising brokerage business. The financial services segment focuses primarily on the provision of financial planning and insurance agency businesses. Holding companies are 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.

Operating segments are reported in a manner consistent with the internal reporting provided to the 'chief operating decision-maker' who is responsible for allocating resources and assessing performance of the operating segments and which has been identified as the Board of Directors that make strategic decisions. 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 expenditure on non-current assets is the corresponding measure of segment assets used to determine how to allocate resources.

2 Segmental reporting

The segment results for 2013 were as follows:

The Company regards the customers who contributing more than 10% of the segmental revenue as major customers. During the financial year 2013, major customers of advertising and media segment contributed approximate to 26% (2012: 12%) of the segment's total revenue.

The segment results for 2012 were as follows:

Geographical information

3 Other investment

Company

On 12 December 2013 the company incorporated Redhot Media International Limited, a company incorporated in Labuan, for the sole purpose to hold the investment in PUC Founder (MSC) Bhd. As the company did not gain control of the investment until after the year end this investment has been classified as an other investment. When the company gains control, this investment will be reclassified to an investment in subsidiary.

In 2010, the Company entered into a conditional Share Sale Agreement with PUC Founder (MSC) Bhd ("Founder") for the disposal of the entire equity interest in Red Media Asia Limited ("RMA") comprising 8,269,818 ordinary shares of USD1 each for a total consideration of RM95 million to be satisfied via the issuance of 950,000,000 new ordinary shares of RM0.10 each in Founder. Pursuant to the Supplemental Share Sale Agreement entered into between the Company and Founder on 14th November 2012, the purchase consideration was revised from RM95,000,000 to RM90,000,000 and the issue price for the consideration share was also revised from RM0.10 to RM0.12 per share, resulting in the number of consideration shares to be reduced from 950,000,000 to 750,000,000 ordinary shares. On 22nd April 2013, Bursa Malaysia Securities Berhad had conditionally approved the said proposed acquisition and the listing and quotation for 750,000,000 new ordinary shares of RM0.10 each.

Under the said corporate exercise, Founder (the legal acquirer) is identified as the acquiree for accounting purposes whilst RMA whose equity interests are acquired (the legal acquiree) is the acquirer for accounting purposes. The acquisition is considered to be a reverse acquisition. Pursuant to a written agreement signed between the Company and Founder, the Company will only assume control of Founder on 1st January 2014 when the new board of directors take office. Hence, the effective date of acquisition is deemed to be 1st January 2014 and the business combination will not be reflected in the financial statements for the current financial year in view that the Company had no power over Founder or ability to affect its returns nor rights to variable returns from its involvement with Founder until it took control.

If the acquisition had occurred immediately before the year end the estimated Group balance sheet as at 31 December 2013 would be as follows:

The above estimated Group Statements of Financial Position is compiled from the carrying value of Founder's Statements of Financial Position as at 31 December 2013 without any adjustments for fair values or goodwill arising on the acquisition.

4 Goodwill

Group

2013 2012

RM'000 RM'000

Cost

At 1 January 38,750 33,241

Additions - 5,084

Refund for overpayment (100) -

Written off (45) -

Exchange adjustments - 425

________ ________

At 31 December 38,605 38,750

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

During the year, the sum of RM144,527 was overpaid on deferred consideration to China Media Mart Information ("CMIT") and China Media Mart Advertising Co Ltd. ("CMAD"), the vendor.

After the negotiation between the Company and the vendor was carried out with regards to the refund of the amount of deferred consideration over-paid, RM100,000 was refunded in June 2013 and the remaining balance was written off.

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:

2013 2012

RM'000 RM'000

CMAD and CMIT businesses 9,232 9,377

IMM Business 23,351 23,351

Ausscar Group 2,990 2,990

RedHot Media Sdn Bhd 2,123 2,123

RH Media Group Sdn Bhd 909 909

______ ______

38,605 38,750

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

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 15% that reflect current market assessments of the time value of money and the risks specific to the CGU's. Future cash flows are derived from the most recent financial budget approved by management for the next five years, beyond that period cash flows are extrapolated using a growth rate of 3%. The growth rate of 3% is 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.

The directors have applied sensitivities to the goodwill impairment test and increasing the discount rate by 3% and removing the 3% growth rate does not result in any impairment of the goodwill for the CGUs.

The directors have conducted a sensitivity analysis on the impairment test of each CGU's carrying value with the following results:

The discount rate would need to increase to 29% to remove the headroom in the Ausscar Group CGU; to 33% to remove the headroom in the CMAD and CMIT CGU's; and to 30% to remove the headroom in IMM.

Reducing the long term growth rate to 0% does not create an impairment charge in either CGU.

Cash flows over the next five years would need to reduce by 25% to remove the headroom in the Ausscar Group CGU; by 37% to remove the headroom in the CMAD and CMIT CGU's; and by 24% to remove the headroom in IMM.

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