Disposal of Assets and Closure of ADH China

RNS Number : 5384B

Asia Digital Holdings PLC

17 April 2012

For immediate release

17 April 2012

Asia Digital Holdings Plc

("ADH" or the "Company")

Proposed disposal of Selected Assets of DGM Asia Pacific Pte Limited

Proposed closure of ADH China

Liquidation of certain ADH subsidiaries

The Board of ADH announces that, on 16 April 2012, ADH entered into a conditional agreement for the disposal of selected business assets of one of its principal trading subsidiaries, DGM Asia Pacific Pte Limited ("DGM Singapore") to Flow Digital Pte Limited("Flow Digital"), a subsidiary of Omnicom Media Group, incorporated and registered in Singapore, for a total consideration of US$250,000 (approximately £157,750). This disposal, of contracts, business information, records, contract related cash funds and goodwill, follows the announcement on 4 April 2012 by ADH of the disposal of DGM India Internet Marketing Private Limited ("DGM India") which is expected to be completed on or before 10 May 2012.

DGM Singapore

DGM Singapore is one of the Company's main operating subsidiaries which deliver leads and sales for advertisers. DGM Singapore's delivery channels include an affiliate network and search engine marketing.

Background to and reasons for the Disposal

Whilst it has continued to manage ADH Group costs due to the ongoing constraints of limited working capital, the Board undertook a strategic review of each of the Company's business units in December 2011 and January this year and at the same time considered alternative financing options for the Group.

The overall assessment by the Board was that the Group's trading operations, generally, are materially constrained by an inability to grow the businesses by investing in technology, the operating teams and the marketing of ADH's business offerings. Whilst DGM Singapore has achieved an improved market positioning, it has continued to be loss making. With the lack of funding for this operation, the Board believes there is little prospect of material growth and sustainable profitability.

Similarly, though DGM India has delivered consistently positive contributions through recent reporting periods, the absence of incremental investment was unlikely to deliver material improvement and without growth was insufficient to carry the overheads of the Company.

In the absence of the required funding to finance the growth of the Group's operations, the Board considered the options available and concluded that the sale of its more established operations in India and Singapore along with the proposed closure of ADH's Chinese operation, ADH (Shanghai) Information Consulting Co.Ltd ("ADH China"), would enable ADH to become an Investing Company and as a result ADH would be able to identify and, subject to additional funding, pursue acquisitions with the potential to generate a return for shareholders that would not otherwise be the case. Accordingly, the Board considers that, in addition to the disposal of DGM India, announced on 4 April 2012, the disposal of selected business assets of DGM Singapore (the "DGM Singapore Assets") and the closure of the ADH China business is in the best interests of shareholders.

The disposal of DGM Singapore Assets

Under the asset purchase agreement between ADH and Flow Digital, ADH has agreed to sell the DGM Singapore Assets to Flow Digital for a total consideration of US $250,000 (approximately £157,750). After expenses, the net proceeds are expected to be US $222,793 (approximately £140,582). The consideration is to be paid to ADH on 1 May 2012 (or such other date as ADH and Flow Digital may in writing agree) ("Completion"). Completion is subject to the satisfaction of a number of pre-conditions including approval by the shareholders of ADH.

During the year to 31 December 2011, DGM Singapore's unaudited results show that the operation generated turnover of £959,000, a gross profit of £436,000 and delivered an EBITDA (loss) of £56,000 (2010: £74,000). As at 31 December 2011, the unaudited results for DGM Singapore show that this operation had a negative net asset value of £169,000. The assets of DGM Singapore, other than the DGM Singapore Assets, are not considered to have any value as at 31 December 2011 and no part of the EBITDA (loss) for the year ended 31 December 2011 is attributable to such assets.

The net proceeds of the disposal of the DGM Singapore Assets coupled with the net proceeds of the disposal of DGM India will improve the Company's balance sheet and will be utilised for working capital purposes. Following these disposals, ADH will have a negative net asset value of approximately £620,000.

Proposed closure of ADH China and liquidation of certain ADH subsidiaries

Following the disposal of DGM India and the proposed disposal of the DGM Singapore Assets, the Company will have only one operating subsidiary, ADH China, which was only established in the summer of 2010. Progress in developing the China business, in the absence of investment capital, has been slower and strategically challenging and the operation has yet to achieve any significant revenues.

As part of ADH's business closure process, it is also proposed that ADH's corporate vehicle in China, ADH China, a 'wholly owned foreign entity' or 'WOFE', would enter into a formal closure process and the Board of ADH will work with local consultants in this respect. The process is expected to take approximately three months and the costs are expected to be less than RMB 400,000 (approximately £40,000).

Aside from ADH's principal subsidiaries, DGM Singapore, DGM India and ADH China, the Group has a number of Singaporean, Hong Kong and Philippines based subsidiaries, listed below, which have negative net assets and which are insolvent. ADH intends to liquidate these subsidiaries and DGM Singapore, following the disposal of the DGM Singapore Assets.

· Aktiv Digital Asia Pacific Pte Ltd ("Aktiv SG")

· Aktiv Digital Hong Kong Pte Ltd ("Aktiv HK")

· Asia Digital Holdings Pte Ltd ("ADH SG")

· Deploy Digital Pte Ltd ("Deploy SG")

· Deploy Philippines - Rep Office ("Deploy PH")

· DGM Asia Pacific Pte Ltd ("DGM Singapore")

Once finalised, the liquidation process, coupled with the net proceeds of the disposals of DGM India and the proposed disposal of the DGM Singapore Assets, is expected to result in an improvement in the Group's balance sheet of about £512,000 leaving the Company with a negative net assets position of approximately £112,000. The following are the amounts due to the creditors of these subsidiaries and DGM Singapore:

· Aktiv SG - £232,000

· Aktiv HK - £5,000

· ADH SG - £66,000

· Deploy SG - £48,000

· Deploy PH - £ 1,000

· DGM Singapore - £160,000

Fundamental Change of Business

As the effect of the disposal of the DGM Singapore Assets and the proposed closure of ADH China, following the recently announced disposal of DGM India, will be to divest the Company of its trading businesses and activities, the disposal of the DGM Singapore Assets and the closure of ADH China will constitute a fundamental change of business under Rule 15 of the AIM Rules. Upon the completion of the disposal of the DGM Singapore Assets and the closure of ADH China, the Company will be treated as an Investing Company. In view of the fundamental change of business, the disposal of the DGM Singapore Assets and the closure of ADH China require the approval of Shareholders in a general meeting at which Shareholders will be also asked also to approve the Investing Policy for the Company going forward.

Information relating to the disposal of DGM India and the proposed disposal of the DGM Singapore Assets, the closure of ADH China and other proposals to be put to Shareholders in general meeting, will be contained in a circular which will be despatched to shareholders shortly. A further announcement will be made at that time.

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