Interim Results

RedHot Media International Limited

('RedHot' or the 'Group)

Half Yearly Financial Results

Six Months Ended 30 June 2010

24 September 2010

RedHot is pleased to announce its unaudited half yearly results for the 6 months ended 30 June 2010.

The Group's summary of its unaudited half yearly results for 2010 are as follows:

·; Total revenue increased by 36% in 2010 H1 to RM16.4 million (2009 H1: RM12.1 million)

·; Gross profit in 2010 H1 grew by 19% to RM9.0 million (2009 H1: RM7.5 million)

·; Gross margin decreased to 55% (2009 H1: 62%)

·; Profit before tax was RM4.9 million (2009 H1: RM3.2 million)

·; Net profit was RM4.9 million (2009 H1: RM3.2 million)

·; Basic earnings per share increased by 54% to 13.36 sen per share (2009: 8.68 sen per share )

·; Cash balances available for use at 30 June 2010 stood at RM1.5million (2009 H1: RM1.2 million)

·; Net assets of RM32.8 million (2009 H1: RM24.8 million)

Commenting on the financial results for the first half of the year, the Group's Chairman, Datuk Oh Chong Peng said:

We are pleased to announce that following our commendable performance in 2009, the Group's results for the first half of 2010 continued to achieve growth compared to its 2009 results year on year, with significant increases in both sales and profits being generated in the period under review.

It should be noted that the Group takes pride in its results because, while advertising expenditure in 2010 generally showed gradual improvement on the previous year, businesses continue to be cautious and selective towards their spending.

This achievement is attributable to, inter alia, the management's strategy, which has included focusing on the fundamental organic development of the organization by integrating resources in Malaysia and China to enhance its service offerings in the industry. This effective strategy has enabled the Group to successfully acquire new key accounts from advertisers of reputable brands in these regions.

Furthermore, in China, the Group has secured strategic collaborations with a prominent China-based media owner listed in the United States, with magazine circulations throughout China. The strategic collaboration places the Group in a position with extra leverage to penetrate new lucrative clientele based in the region.

The Group also anticipates an exciting period in the second half of the year as it continues to develop its plans of adding new lucrative business avenues, which include out-of-home advertising and interactive advertising platforms in the social media sector of the industry. Its stated strategy of growing through mergers and acquisitions remains and negotiations continue on certain opportunities.

The Group was pleased to announce in the period under review a further investment of RM1.5 million in its wholly owned subsidiary, RH Media Group Sdn Bhd, by Kumpulan Modal Perdana Sdn Bhd which provides further funding for growth in China both organically and through acquisitions.

We look forward to the second half of 2010 with increasing confidence towards the Group's continued positive performance.

Notes to editors:

Exchange rate: £1 = RM4.91 (as at 30 June 2010)

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 STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE

The results shown above relate entirely to continuing operations.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS AT 30 JUNE

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ( continued )

FOR THE SIX MONTHS ENDED 30 JUNE

The group's other reserves comprise the following:

Notes to the unaudited results for the six months to 30 June 2010

1. General information

RedHot Media International Limited is quoted on the AIM Market of the London Stock Exchange.

The Group's interim financial statements for the six months to 30 June 2010, from which this financial information has been extracted, and for the comparative six months ended 30 June 2009, are prepared on a going concern basis and in accordance with IFRS including IAS34 " Interim Financial Reporting " as adopted in the European Union.

The financial information contained in this announcement does not constitute full statutory accounts. The figures are extracted from the financial statements for the six month period to 30 June 2010. 

These financial statements consolidate the accounts of RedHot Media International Limited and all of its subsidiary undertakings draw up to 30 June each year.

The financial information in this announcement has not been audited by the Company's auditors.

2. Accounting policies

This financial information has been prepared using accounting bases and policies consistent with those used in the preparation of the audited accounts of the Company and the Group for the year ended 31 December 2009 and those to be used for the year ending 31 December 2010.

3. Segmental reporting

For the purpose 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 service. 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 "elimination". 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 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 result for 2010 H1 were as follow:

3. Segmental reporting (continued )

Geographical information

4. Earnings Per Share

The basic earnings per ordinary share has been calculated using the profit for the six months ended 30 June 2010 attributable to the company's equity shareholders of RM4,847,874 (2009: RM3,148,436) and the weighted average number of ordinary shares in issue of 36,269,727.

For the purpose of calculating diluted earnings per share, the weight average number of ordinary shares in issue during the financial year have been adjusted for the dilutive effects of all potentially dilutive ordinary shares.

5. Intangible assets

Intangible assets are amortised over 3 to 10 years. The directors have assessed the carrying value of the intangible assets and in their opinion no provision for impairment is currently considered necessary.

6. Goodwill

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 amounts of goodwill was allocated as follows as of 30 June 2010 :

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 7% to 8% using pre-tax rates 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.

7. Trade and other receivables

8. Cash and cash equivalents

Cash and cash equivalents includes fixed deposits of RM1,627,298 (2009 : RM3,043,000) pledged as security for bank borrowings. As these are pledged accounts they are not included in the cash and cash equivalents in the cash flow statement and are shown separately on the balance sheet.

9. Bank overdrafts

The interest rate per annum during the 6-months to 30 June 2010 for bank overdrafts ranged from 5.55% to 6.3% (2009: 6.25%) per annum.

The bank overdrafts are secured by the following:

a) Fixed deposits of RM1,627,298 together with interest accrued thereon;

b) Certificate of Guarantee from Credit Guarantee Corporation Malaysia Berhad under Enhancer Scheme for RM800,000; and

c) Personal guarantee by one of the directors.

10. Redeemable Convertible Cumulative Preference Shares

The redeemable convertible cumulative preference shares ("RCCPS")are issued by the company's subsidiaries, mainly RH Media Group Sdn. Bhd. ("RHMG"). The group intends to use the net proceeds of the investment to pursue its strategy of growing organically and through potential acquisitions, particularly in China.

The main investments received are of USD1.0 million and RM1.5 million in RHMG in receipt for 1 million Class A RCCPS and RM1.5 million Class B RCCPS respectively. The subscriber, namely, Kumpulan Modal Perdana Sdn. Bhd., a Malaysian government linked corporation based in Kuala Lumpur, has been granted a coupon rate of 8% per annum and 4% per annum respectively for the investments and has the right to convert the RCCPS into ordinary shares in RHMG at their discretion. RHMG shall warrant an exit strategy for the subscriber upon conversation of its RCCPS via a listing of RHMG on the mutually accepted stock exchange within 48 months from the dates of investments with either:

i. a return of 3 times the investment value; or

ii. a 40% discount to the listing price, whichever results in lower cost per share at point of conversion.

In the event a listing does not occur within 48 months from the dates of investments, the subscriber at its sole discretion shall have an option to either grant a 12 month extension or exercise a put-option for 2 times of the initial investment value. The put option, if exercised, would be paid in cash or an equivalent value through the issuance of equity shares by the company based on a 5 day average of the company's share price prior to the date of exercise.

In the event of a breach of agreement by RHMG, insolvency or liquidation of RHMG, commencement of any criminal prosecution against the board of directors of RHMG or Cheong Chia Chieh ceasing to be a director of the company, the subscriber shall reserve the right to redeem the RCCPS or exercise a put-option to RHMG which grants the subscriber returns of investments with an 8% coupon rate for Class A RCCPS and 4% coupon rate for Class B RCCPS and 10% annual rate of return of the investment value to be paid in cash or an equivalent value by issuance of equity of the company's shares based on a 5 day average of the company's share price prior to the date of exercise.

11. Interim Report

The interim financial statement will be, in accordance with AIM Rule 26 of the AIM Rules for Companies, be available shortly on the Group's website (www.redhot.asia).

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