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28 May 2009 16:11
RedHot Media International Limited
('RedHot' or the 'Company')
Trading Statement
28 May 2009
The Directors of RedHot Media International Limited and its subsidiaries (the "Group") are pleased to announce that trading performance for 2008 was in line with market expectations and that the unaudited results for 2008 are expected to show turnover of approximately RM22.4 million and profit after tax of approximately RM4.0 million when they are announced next week.
However, the Group, like many other companies during this global recession, has experienced a slowdown in turnover during the first 5 months of 2009 as the worldwide recessionary conditions have begun to affect the Malaysian economy.
The Group's unaudited management accounts show a modest profit in the year to date and the Directors believe they may have to prudently increase provisions for bad debts during the remainder of the year if the improvements in business conditions are not sustained.
The Directors are confident that the Group will continue to be profitable for the full year to end 31 December 2009 but it is not yet possible to accurately predict whether profitability for 2009 as a whole will be higher or lower than that of 2008. The Directors are confident that the Group's recent acquisitions (as announced in late 2008) and its expansion in China will have a positive impact on overall trading performance during the rest of the year.
The Directors believe that the political situation in Malaysia was a significant contributing factor to the slowdown in the Group's trading performance in the first quarter. However, with the appointment of the new Prime Minister and the benefits of China's RMB4 trillion and Malaysia's RM7 billion economic stimulus packages beginning to seep into the Malaysian economy, the Company anticipates a marked improvement in these two markets for the second half of 2009. The Company has detected an improvement in performance in May 2009, and whilst it is not possible to forecast whether this recovery will be sustained, the Board is very hopeful the full year results for 2009 will exceed those of 2008.
The Company will provide a further update on performance when appropriate.
For further information, contact:
RedHot Media International Limited
Melissa Gilmour or +44 7970 767869
Cheong Chia Chieh or +601 2329 5522
Raymond Hor +603 7651 0188
Blomfield Corporate Finance Limited (Nominated Adviser) +44 207 489 4500
James Pinner or
Nick Harriss
Religare Hichens, Harrison plc (Broker) +44 207 382 4450
Daniel Briggs or
Colin Rowbury
Notes to editors:
RedHot Media International Limited (AIM: RHM), is a Cayman Islands incorporated holding company. Its primary activity is that of media broking group, including an innovative barter sales trading activity, in Malaysia and the People's Republic of China ("PRC"), with the majority in Malaysia.
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.
The Company aims to extend this model to work in other Asian countries; initially China (with offices in Beijing, Shanghai, Guangzhou).
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