Final Results for 15 months to 31 March 2012

RNS Number : 5931Q

Asia Digital Holdings PLC

07 November 2012

 



7 November 2012

Asia Digital Holdings Plc

("ADH" or the "Company")

Final Results

For the 15 months ended 31 March 2012

Asia Digital Holdings plc (AIM: ADH.L) today announces its final results for the 15 months ended 31 March 2012.

Highlights:

·	Material reduction in administrative expenses from continuing operations to £1.14 million (year to 31 December 2010: £2.79 million)
·	Sale of DGM operations in India and Singapore, which were a substantial part of the Group, after the reporting period
·	Closure of all other operations in China and Southeast Asia

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For further information, please contact:

Asia Digital Holdings plc
Adrian Moss, Chief Executive	www.adhplc.asia

Northland Capital Partners Limited
Gavin Burnell / Edward Hutton	Tel:  [phone]
	www.northlandcp.co.uk

Chairman's Statement

I am pleased to present the Group's final results for the 15 months ended 31 March 2012.

Operational Review

The Group operated two business units during the 15 months to 31 March 2012: DGM and AKTIV, both intermediary operations in the digital advertising space.

DGM delivers customers for global brands on a success-based payment model. Typically delivery is through websites (or networks of sites) that are willing to promote an advertiser's product on a success fee basis, or through search engines such as Baidu, Google, Bing, Yahoo. During the period DGM operated mainly in India, Southeast Asia and China.

AKTIV is a digital advertising sales house that represents media owners, selling their advertising space to global agencies, and offering its customers administrative and commercial economies of scale.  The AKTIV business unit operated mainly in Southeast Asia, and was discontinued in April 2011 as a result of persistent losses.

Review of Trading

The Group's continuing operations, mainly the DGM operations in Singapore and China, showed a material increase in gross margin to 37%, up from 18% in the previous reporting period. As a result, the continuing operations delivered a gross profit of £0.61 million during the financial period (year to 31 December 2010: £0.56 million). This is in spite of a material reduction in revenues to £1.67 million (year to 31 December 2010: £3.09 million).

In an increasingly competitive environment our operations in India showed growth in sales and profitability leveraging a strong market position. The operation delivered consistently positive contributions through the reporting profit. Notwithstanding the absence of incremental investment, India was the only operation to deliver a positive contribution during the period at £0.25 million (year to 31 December 2010: £0.02 million).

Under a new managing director, DGM Singapore made progress in client wins including CMC Markets, Far East Hospitality Group as well as affiliate marketing appointments for The Economist and Expedia.  However, whilst the operation achieved an improved market positioning, it continued to be loss making.

Progress in China has been much slower and more strategically challenging than expected since the establishment of the Company office there in 2010. Throughout 2010 and early 2011, the Group operated in China with one or two members of staff, predominantly servicing the Dell account. The Board was confident that the Dell business could grow on the back of a significantly increased budget and targets for 2012 leading to a self funded expansion of that office. Unfortunately that failed to materialise. Accordingly, the operation was discontinued in June 2012.

Working Capital

The Group's overheads have been kept under control as a result of material cost savings achieved and reported previously. Administrative expenses from continuing operations for the period showed a material reduction to £1.71 million (year to 31 December 2010: £3.01 million). The overall cost savings were predominantly driven by a reduction in central costs to £0.80 million for the period (year to 31 December 2010: £2.25 million). 

The material reduction in the central cost base as well as marginal operational improvements, led to a material reduction in the loss from continuing operations to £1.14 million (year to 31 December 2010: £2.79 million). However, the net trading loss in the period has led to further deterioration of the working capital position during the period.

As a result the Board announced in December 2011 that it would complete a strategic review. The Board concluded that the operations of the Group have been materially constrained by an inability to grow the businesses by investing in technology, the operating teams and the marketing of ADH's business offerings.

In the absence of the required funding to finance the growth of the Group's operations to a profitable position, the sale of its more established operations in India and Singapore along with the closure of the Chinese operation would enable the Group to become an investing company and subject to additional funding, pursue acquisitions with the potential to generate a return for shareholders that would not otherwise be the case.

This strategy was approved at a meeting of the shareholders on 28th May 2012 along with an investment policy to focus on investing in businesses which, in the opinion of the Board possess the opportunity for high growth. The main focus for identifying such businesses will be in the communications, energy, resources, precious metals, commodity trading and infrastructure sectors, in diverse geographic locations including Europe and North America.

Prospects and Strategy

On 4 April 2012, the Group announced that it had entered into an agreement for the sale of the issued share capital of DGM India and related agreements for a total consideration of Rupees 33,500,000 (approximately £412,409) and on 17 April 2012, it announced that it had entered into a conditional agreement for the sale of the DGM Singapore Assets for a total consideration of US$250,000 (approximately £158,228). The Group's Chinese operation ceased operations in May 2012.

The sale of DGM India completed in July 2012 with all consideration received by 10th July 2012.

The DGM Singapore assets transaction completed in June 2012 with all consideration received by 30th June 2012.

The balance sheet of the Group, though improved by receipt of the above consideration, remains weak and will require further funding to execute its investment policy. Trading in the Ordinary Shares of the Company will therefore remain suspended. It should be noted that, under the AIM Rules for Companies, if trading in the Ordinary Shares is still suspended six months from the date of suspension on 13 August 2012, the admission of  the Ordinary Shares will be cancelled.

In order to enable the Group to execute its investment policy, the Directors are endeavouring to seek additional long term funding and are in discussions with a potential provider of such funding.  

The Board would like to express its gratitude to the shareholders and staff who have supported us during the period, and would like to emphasis our commitment to delivering shareholder value.

David Lees

Chairman

2 November 2012

Consolidated income statement

For the 15 months ended 31 March 2012

			Restated
		15 months ended	Year ended
		31 March	31 December
		2012	2010
	Notes	£'000	£'000
Continuing operations
Revenue	2	1,665	3,089
Cost of sales		(1,055)	(2,533)
Gross profit		610	556
Administrative expenses
- depreciation		(26)	(70)
- share-based payments		(21)	(269)
- other administrative expenses		(1,706)	(3,005)
		(1,753)	(3,344)
Loss from operations	3	(1,143)	(2,788)
Interest received		-	-
Interest payable		(4)	(73)
Share of loss of associates		-	-
Loss before tax		(1,147)	(2,861)
Income tax		(13)	56
Total loss after taxation from continuing operations		(1,160)	(2,805)
Discontinued operations
Profit before tax from discontinued operations		77	868
Profit on disposal of subsidiary		-	3,263
Profit on disposal of associate		195	-
Income tax		(32)	13
Profit after tax from discontinued operations		240	4,144
Total (loss)/profit		(920)	1,339
Attributable to:
Equity holders of the parent		(920)	1,339
Earnings per share
Basic and diluted (loss)/earnings per share		(11.98p)	17.44p
Basic and diluted loss per share from continuing operations		(15.11p)	(36.53p)
Basic and diluted earnings per share from discontinued operations		3.13p	53.96p

Consolidated statement of comprehensive Income

For the 15 months ended 31 March 2012

		15 months ended	Year ended
		31 March	31 December
		2012	2010
	Notes	£'000	£'000
(Loss)/profit for the period		(920)	1,339
Other comprehensive income
Exchange differences on translation of foreign operations:
- (losses)/gains recognised during the period		(71)	102
- reclassification adjustment on disposal		-	512
Total comprehensive income for the period		(991)	1,953
Attributable to:
Equity holders of the parent		(991)	1,953

Consolidated balance sheet

As at 31 March 2012

		31 March	31 December
		2012	2010
	Notes	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		-	34
		-	34
Current assets
Trade and other receivables		214	3,112
Cash and cash equivalents		22	538
		236	3,650
Assets of disposal group classified as held for sale		836	-
		1,072	3,650
Total assets	2	1,072	3,684
Equity and liabilities
Equity
Called up share capital		4,852	4,852
Capital redemption reserve		13,188	13,188
Share-based payment reserve		1,176	1,155
Share premium account		23,792	23,792
Translation reserve		(72)	(1)
Retained earnings		(43,815)	(42,895)
Total equity		(879)	91
Current liabilities
Trade and other payables		1,297	3,138
Onerous lease provisions		42	215
Corporation tax		-	16
		1,339	3,369
Liabilities of disposal group classified as held for sale		612	-
Non-current liabilities
Onerous lease provisions		-	224
Total liabilities	2	1,951	3,593
Total equity and liabilities		1,072	3,684

Company registration number 03904195

These financial statements were approved by the Board, authorised for issue and signed on their behalf on 2 November 2012 by:

Adrian Moss

Chief Executive Officer

Consolidated cash flow statement

For the 15 months ended 31 March 2012

		15 months ended	Year ended
		31 March	31 December
		2012	2010
	Notes	£'000	£'000
Operating activities
Loss before tax		(1,147)	(2,861)
Depreciation		26	70
Amortisation		-	-
Share-based payment		21	269
Increase/(decrease) in receivables		886	(94)
(Decrease) in payables		(1,356)	(886)
Foreign exchange differences		(58)	78
Finance expense		4	73
Tax (charge)/credit		(13)	56
Cash flow from operating activities in continuing operations		(1,637)	(3,295)
Cash flow from operating activities in discontinued operations		397	989
Total cash flow from operating activities		(1,240)	(2,306)
Investing activities
Purchase of property, plant and equipment		(6)	(31)
Consideration for disposal of subsidiary (net of cash disposed)		664	2,100
Consideration for disposal of associate		200	-
Cash flow from investing activities in continuing operations		858	2,069
Cash flow from investing activities in discontinued operations		16	(22)
Total cash flow from investing activities		874	2,047
Financing activities
Issue of ordinary share capital		-	-
Share premium on the issue of ordinary share		-	-
Issue of convertible loan notes		-	-
Repayment of convertible loan notes		-	(500)
Interest paid		(4)	(118)
Cash flow from financing activities in continuing operations		(4)	(618)
Cash flow from financing activities in discontinued operations		(6)	(272)
Total cash flow from financing activities		(10)	(890)
Net (decrease) in cash and cash equivalents		(376)	(1,149)
Cash and cash equivalents at start of period		538	1,617
Exchange differences on cash and cash equivalent		(15)	70
Cash and cash equivalents including cash held in disposal group at the end of the period		147	538
Cash held in disposal group		(125)	-
Cash and cash equivalents at the end of the period		22	538
Cash and cash equivalents comprise:
Cash and cash in bank		22	517
Time deposits		-	21
Cash and cash equivalents at end of period		22	538

Consolidated statement of changes in equity

For the 15 months ended 31 March 2012

			Capital	Share-based
	Share	Share	Redemption	payment	Translation	Retained	Total
	capital	premium	reserve	reserve	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2011	4,852	23,792	13,188	1,155	(1)	(42,895)	91
Share options issued in share-based payments	-	-	-	21	-	-	21
Issue of share capital	-	-	-	-	-	-	-
Transactions with owners	-	-	-	21	-	-	21
Profit for the period	-	-	-	-	-	(920)	(920)
Other comprehensive income:
- exchange difference on translation of foreign operations	-	-	-	-	(71)	-	(71)
Total comprehensive income for the period	-	-	-	-	(71)	(920)	(991)
Balance at 31 March 2012	4,852	23,792	13,188	1,176	(72)	(43,815)	(879)
Balance at 1 January 2010	4,792	23,703	13,188	1,033	(615)	(44,234)	(2,133)
Share options issued in share-based payments	-	-	-	122	-	-	122
Issue of share capital	60	89	-	-	-	-	149
Transactions with owners	60	89	-	122	-	-	271
Profit for the year (Restated)	-	-	-	-	-	1,473	1,473
Other comprehensive income:
- historical exchange differences on translation (note 8)	-	-	-	-	512	(134)	378
- exchange difference on translation of foreign operations	-	-	-	-	102	-	102
Total comprehensive income for the year	-	-	-	-	614	1,339	1,953
Balance at 31 December 2010	4,852	23,792	13,188	1,155	(1)	(42,895)	91

Notes to the financial information

For the 15 months ended 31 March 2012

1          Publication of non-statutory accounts

The financial information set out in this announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 2006.

The financial information for the year ended 31 March 2012 has been extracted from the Group's financial statements to that date which have been prepared in accordance with IFRS as adopted in the EU and which have received an unmodified auditor's report.. 

Emphasis of matter - Going concern

In forming their opinion on the financial statements, which is not modified, the auditors have considered the adequacy of the disclosures made in the accounting policies concerning the Group's ability to continue as a going concern. As explained within the financial statements, the Group's plans to improve its balance sheet and obtain long term funding are dependent on the ability to secure new investment and creditor and shareholder approvals of a Company Voluntary Agreement (CVA) in the UK. These conditions, along with other matters explained within the financial statements indicate the existence of a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

2          Revenue and segmental information

The Group is principally engaged in the provision of online marketing services. Revenue is attributable to the principal activity, which is mainly carried out in China, India and Southeast Asia. In addition to these geographical segments, management also considers the business from an operating segment perspective.

The main operating segment is DGM. The other operating segments, including AKTIV which was discontinued during the reporting period, do not meet the quantitative thresholds required by IFRS 8 to be reported as separate segments.

The DGM segment is a specialist online marketing operation focusing on the delivery of customers to advertisers through search engine marketing, affiliate and display advertising, servicing both agencies and direct clients.

An analysis of revenue and segment result by geography and operating segment is shown below:

							Operating†	Holding††
							central	company
	China			India	SE Asia	Other	costs	costs	Total
15 months ended 31 March 2012	£'000			£'000	£'000	£'000	£'000	£'000	£'000
External revenue
All operations (£'000)
DGM	552			2,392	1,113	-	-	-	4,057
Other	-			-	126	-	-	-	126
	552			2,392	1,239	-	-	-	4,183
Discontinued operations (£'000)
DGM	-			(2,392)	-	-	-	-	(2,392)
Other	-			-	(126)	-	-	-	(126)
	-			(2,392)	(126)	-	-	-	(2,518)
Continuing operations (£'000)
DGM	552			-	1,113	-	-	-	1665
Other	-			-	-	-	-	-	-
Continuing operations (£'000)	552			-	1,113	-	-	-	1,665
Continuing operations (%)	33			-	67	-	-	-	100
Segment result
DGM	(256)			251	(97)	-	(237)	-	(339)
Other	(9)			-	(91)	(22)	(40)	(518)	(680)
	(265)			251	(188)	(22)	(277)	(518)	(1,019)
Amortisation									-
Depreciation									(26)
Share-based payment									(21)
Interest									(4)
Profit on disposal of subsidiary									-
Profit on disposal of associate									195
Tax									(45)
Total profit for the period									(920)
Segmental assets (£'000)	76			836	107	-	-	53	1,072
Segmental liabilities (£'000)	159			612	718	-	-	462	1,951
Major customers‡	1			2	4	-	-	-	-
Revenue from major customers (£'000)	542			564	565	-	-	-	-

 ‡ Number of customers generating more than 10% of segment revenue.

† Included in 'Operating central costs' is a £47,000 provision release from prior period relating to the Group's affiliate tracking technology

†† Included in 'Holding company costs are leasehold provisions releases (£161,000); UK VAT provision releases (£131,000) and others (£15,000).

					Operating†	Holding††
					central	company
	China	India*	SE Asia	Other**	costs	costs	Total
Year ended 31 December 2010 (restated)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
External revenue
All operations (£'000)
DGM	456	1,816	2,633	14,433	-	-	19,338
Other	-	-	1,358	-	-	-	1,358
	456	1,816	3,991	14,433	-	-	20,696
Discontinued operations (£'000)
DGM	-	(1,816)	-	(14,433)	-	-	(16,249)
Other	-	-	(1,358)	-	-	-	(1,358)
	-	(1,816)	(1,358)	(14,433)	-	-	(17,607)
Continuing operations (£'000)
DGM	456	-	2,633	-	-	-	3,089
Other	-	-	-	-	-	-	-
Continuing operations (£'000)	456	-	2,633	-	-	-	3,089
Continuing operations (%)	15	-	85	-	-	-	100
Segment result
DGM	(73)	21	(74)	788	(621)	-	41
AKTIV	-	-	93	-	-	-	93
Other	-	-	23	(110)	-	(1,628)	(1,715)
	(73)	21	42	678	(621)	(1,628)	(1,581)
Amortisation							-
Depreciation							(70)
Share-based payment							(269)
Interest							(73)
Profit on disposal of subsidiary							3,263
Tax							69
Total profit for the year							1,339
Segmental assets (£'000)	503	962	1,430	-	-	789	3,684
Segmental liabilities (£'000)	439	765	1,111	-	-	1,278	3,593
Major customers‡	1	1	5	1	-	-	-
Revenue from major customers (£'000)	456	258	1,386	6,968	-	-	-

 *   Included in India segment result is a £65,000 provision for bad debts.

**    Other segment result relates to the Group's Australian operation which was disposed during the year.

 †   Included in "Operating central costs" are provisions relating to the decommissioning of the Group's legacy affiliate tracking technology (£95,000) and staff reorganisation costs (£21,000).

††   Included in "Holding company costs" are non-recurring staff reorganisation costs (£48,000), leasehold provisions relating to the Group's premises in London (£81,000) and other non-recurring provisions (£167,000).

 ‡   Number of customers generating more than 10% of segment revenue.

3          Loss from operations

Loss from operations is stated after charging:

	15 months ended	Year ended
	31 March	31 December
	2012	2010
	£'000	£'000
Amortisation of intangible assets	-	-
Depreciation of property, plant and equipment	26	76
Research and development expense	-	-
Auditors' remuneration for auditing of accounts †	64	65
Auditors' remuneration for non-audit services * †	31	19
Operating lease rentals	130	276
Lease commitment provision	-	81
Share-based payment costs	21	269

*  Auditors' remuneration for non-audit services comprised other services relating to taxation of £31,000 (year to 31 December 2010: £19,000) and all other services £Nil (year to 31 December 2010: £Nil).

† The £95,000 charge relating to auditors' remuneration for auditing and non-audit services includes remuneration to the Group auditor (£61,000) and other auditors (£34,000).

Copies of the financial statements will be sent to shareholders in due course when they will be available at the Company's website (www.adhplc.com) and from the Company's registered office at 19 Cavendish Square, London, W1A 2AW.

 The Annual General Meeting of Asia Digital Holdings PLC will be held on 5 December 2012 at 19 Cavendish Square, London W1A 2AW at 11.00am.

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