(RHM) RedHot Media Intl

Notes to the unaudited results for the six months to 30 June 2011

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 2011, from which this financial information has been extracted, and for the comparative six months ended 30 June 2010, 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 interim financial statements for the six month period to 30 June 2011. 

These interim financial statements consolidate the accounts of RedHot Media International Limited and all of its subsidiary undertakings draw up to 30 June each year. Where shown, the comparatives for the year ended 31 December 2010 are the Company's full statutory accounts for that year The auditors' report on those accounts was unqualified.

The financial information in this announcement has been reviewed but 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 Group for the year ended 31 December 2010 and those to be used for the year ending 31 December 2011.

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.

The Group operate in two (2) geographical segments which are i) Malaysia; and ii) China & Hong Kong.

The segment result for 2011 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 2011 attributable to the company's equity shareholders of RM4,707,897 (31 Dec 2010: RM4,847,874, 30 June 2010: RM4,847,874) and the weighted average number of ordinary shares in issue of 36,577,215 (2010: 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 2011:

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% 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.

During the financial period, the Group paid a sum of RM6.0 million to the vendor of CMAD and CMIT as the final purchase consideration of the business acquired after satisfying the profit target per the terms and conditions in the sales and purchase agreement. This amount is captured as the additional goodwill to the Group. The movement in the period is as a result of a change in the estimate from 31 December 2010.

7.    Trade and other receivables

8.    Cash and cash equivalents

Cash and cash equivalents excludes fixed deposits of RM1,630,000 (31 Dec 2010 : RM1,630,000, 30 June 2010 : RM1,627,000) 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