Acquity Group Limited Reports Results for Fourth Quarter and Twelve Months Ended December 31, 2012

CHICAGO, March 20, 2013 /PRNewswire/ -- Acquity Group Limited ("Acquity Group" or the "Company") (NYSE MKT: AQ) today reported the following financial results for the fourth quarter and twelve months ended December 31, 2012.

Financial highlights for the three month period ended December 31, 2012, compared to the three month period ended December 31, 2011

• Revenues increased by $3.2 million, or 10.3%, to $33.8 million, compared to $30.6 million for the three month period ended December 31, 2011.
• IFRS operating profit was $3.1 million, or 9.1% of revenues, compared to $4.1 million, or 13.5% of revenues, for the three month period ended December 31, 2011.
• IFRS operating profit, excluding costs associated with our recent initial public offering and amortization of purchased intangible assets was $3.7 million, or 11.0% of revenues, compared to $5.1 million, or 16.8% of revenues, for the three month period ended December 31, 2011. Refer to the "Reconciliation of Non-IFRS Financial Measures to IFRS Profit" in the tables that follow for additional details for all non-IFRS financial measures. 
• We reported an impairment loss of $7.0 million related to our investments in two associate companies. 
• IFRS profit/(loss) attributable to equity holders of the Company was $(4.9) million, or $(0.21) per American depositary share ("ADS"), compared to $1.8 million, or $0.10 per ADS, for the three month period ended December 31, 2011.
• Non-IFRS adjusted profit attributable to equity holders of the Company was $1.9 million, or $0.08 per ADS, compared to $2.6 million, or $0.14 per ADS, for the three month period ended December 31, 2011.
• Non-IFRS adjusted EBITDA was $4.4 million for the three month period ended December 31, 2012, compared to $5.7 million for the three month period ended December 31, 2011.
• As of December 31, 2012, the Company had unrestricted cash and cash equivalents of $36.5 million.

Financial highlights for the twelve month period ended December 31, 2012, compared to the twelve month period ended December 31, 2011

• Revenues increased by $34.3 million, or 32.2%, to $141.0 million, compared to $106.7 million for the twelve month period ended December 31, 2011.
• IFRS operating profit increased by $5.0 million, or 31.2%, to $20.8 million, or 14.7% of revenues, compared to $15.8 million, or 14.8% of revenues, for the twelve month period ended December 31, 2011.
• IFRS operating profit, excluding costs associated with our recent initial public offering and amortization of purchased intangible assets, increased by $5.9 million, or 30.1%, to $25.5 million, or 18.0% of revenues, compared to $19.6 million, or 18.3% of revenues, for the twelve month period ended December 31, 2011.
• We reported an impairment loss of $7.0 million related to our investments in two associate companies. 
• IFRS profit attributable to equity holders of the Company was $3.3 million, or $0.15 per ADS, compared to $8.6 million, or $0.46 per ADS, for the twelve month period ended December 31, 2011.
• Non-IFRS adjusted profit attributable to equity holders of the Company increased by $1.9 million, or 17.3%, to $13.3 million, or $0.61 per ADS, compared to $11.4 million, or $0.61 per ADS, for the twelve month period ended December 31, 2011.
• Non-IFRS adjusted EBITDA increased by $6.5 million, or 30.8%, to $27.8 million for the twelve month period ended December 31, 2012, compared to $21.3 million for the twelve month period ended December 31, 2011.

"We grew the business substantially in 2012 amidst uncertain macro-economic conditions in the second half of the year," said Christopher Dalton, Chief Executive Officer of Acquity Group.  While our fourth quarter performance was impacted by these challenging conditions, we are seeing positive trends as we close the first quarter that are supporting our objectives for 2013."

Mr. Dalton added, "We are entering the new year with improvements in our corporate structure that will keep us focused on our core business, three new markets in Ottawa, Toronto and Atlanta along with new senior talent with a significant depth of experience, a strong business strategy, pipeline and value proposition driving our long-term growth."  

Fourth Quarter 2012 Financial Results

Three months ended December 31, 2012 compared to three months ended December 31, 2011

Revenues increased by $3.2 million, or 10.3%, to $33.8 million for the three month period ended December 31, 2012, from $30.6 million for the three month period ended December 31, 2011.  Revenues continued to grow due to strong demand seen in the market place for the Company's expertise and focused approach to delivering customer value.

Cost of revenues increased by $2.4 million to $20.1 million for the three month period ended December 31, 2012, from $17.7 million for the three month period ended December 31, 2011, which was primarily driven by continued organic growth of our staff to accommodate the demand for our services.  These costs increased as a percentage of revenues to 59.5% for the three month period ended December 31, 2012, from 57.9% for the three month period ended December 31, 2011.

Selling and marketing expenses increased by $0.5 million to $2.6 million for the three month period ended December 31, 2012, from $2.1 million for the three month period ended December 31, 2011.  These costs increased as a percentage of revenues to 7.7% for the three month period ended December 31, 2012, from 6.9% for the three month period ended December 31, 2011.  This result was due to continued investment in business development as we plan for continued growth. 

Administrative expenses increased by $1.7 million to $8.0 million for the three month period ended December 31, 2012, from $6.3 million for the three month period ended December 31, 2011.  These costs increased as a percentage of revenues to 23.8% for the three month period ended December 31, 2012, from 20.5% for the three month period ended December 31, 2011.  The increase was primarily due to an increase in operations headcount in order to support the planned growth of our business.

Equity in losses of associate companies, prior to the impairment of associate companies, was $0.2 million for the three month period ended December 31, 2012, compared to $0.5 million for the three month period ended December 31, 2011.

Impairment losses related to our investments in two associate companies were $7.0 million for the three month period ended December 31, 2012. In the fourth quarter, the board of directors, based on continued operational losses at the two associate companies and significant uncertainty in the respective business plans, determined to pursue strategic alternatives with these investments. As part of these considerations, the Company believed that indicators of the investment impairment were present. For the Huaren Commercial Trading, Co. business, the Company engaged an independent valuation firm to determine the fair value of its investment. Based on the results of this valuation, the Company reduced the carrying value of its investment to zero and recorded a $6.3 million impairment loss. For Digital Li-Ning Company Limited, the Company carried out a net realizable value analysis based on a liquidation scenario and recorded an impairment loss of $0.7 million, based on the difference between the carrying amount of investment and the expected net realizable value of $0.2 million. 

Income tax expense was $1.4 million and $1.9 million for the three month periods ended December 31, 2012 and 2011, respectively.  Excluding the effect of the impairment losses on associate companies in 2012, our effective tax rate was 48.9% and 53.3% for the three month periods ended December 31, 2012 and 2011, respectively.  

Twelve months ended December 31, 2012 compared to twelve months ended December 31, 2011

Revenues increased by $34.3 million, or 32.2%, to $141.0 million for the twelve month period ended December 31, 2012, from $106.7 million for the twelve month period ended December 31, 2011.  Revenues increased as a result of our continued focus on being one of the best providers in Brand eCommerce™ and Digital Marketing service capabilities and our ability to continue to secure new accounts that are committed to the digital channel.

Cost of revenues increased by $18.6 million to $79.1 million for the twelve month period ended December 31, 2012, from $60.5 million for the twelve month period ended December 31, 2011, which was primarily driven by organic growth of our staff to accommodate the demand for our services.  These costs decreased as a percentage of revenues to 56.1% for the twelve month period ended December 31, 2012, from 56.8% for the twelve month period ended December 31, 2011.

Selling and marketing expenses increased by $1.6 million to $9.4 million for the twelve month period ended December 31, 2012, from $7.8 million for the twelve month period ended December 31, 2011. These costs decreased as a percentage of revenues to 6.7% for the twelve month period ended December 31, 2012, from 7.3% for the twelve month period ended December 31, 2011. This improvement as a percentage of revenues was the result of leveraging our sales force. 

Administrative expenses increased by $8.3 million to $29.6 million for the twelve month period ended December 31, 2012, from $21.3 million for the twelve month period ended December 31, 2011. These costs were 21.0% and 20.0% of revenues for the twelve month periods ended December 31, 2012 and 2011, respectively. The increase as a percentage of revenues was primarily due to an increase in operations headcount in order to support the overall growth and strategic initiatives of our business.

Equity in losses of associate companies was $1.4 million for the twelve month period ended December 31, 2012, compared to $1.0 million for the twelve month period ended December 31, 2011.

Impairment losses related to our investments in two associate companies was $7.0 million for the twelve month period ended December 31, 2012 as discussed above. 

Income tax expense was $9.9 million and $6.5 million for the twelve month periods ended December 31, 2012 and 2011, respectively.  Excluding the effect of the impairment losses on associate companies in 2012, our effective tax rate was 50.9% and 43.7% for the twelve month periods ended December 31, 2012 and 2011, respectively.  The increase for the twelve month period ended December 31, 2012, compared to the twelve month period ended December 31, 2011 was primarily attributable to the impact of non-deductible costs related to our initial public offering ("IPO") and losses from non-U.S. operations for which no tax benefit was available.

First Quarter 2013 Outlook

The Company currently expects the following financial results for the first quarter of 2013:

• Revenues are expected to be at or above $33.5 million; and
• IFRS operating profit margin, excluding amortization of purchased intangible assets, is expected to be at or above 7.5%.

Webcast and Conference Call

A conference call and webcast have been scheduled for 4:30 p.m. EDT today to discuss these results. Details of the conference call are as follows:

Alternatively, the conference call will be available via webcast at www.acquitygroup.com by clicking on the "Investors" tab.

Non-IFRS Financial Measures

Acquity Group provides non-IFRS financial measures to complement reported IFRS results. Management believes these measures help illustrate underlying trends in the Company's business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing the Company's business and evaluating its performance. The Company anticipates that it will continue to report both IFRS and certain non-IFRS financial measures in its financial results, including non-IFRS results that exclude interest, income tax provisions, depreciation and amortization, costs associated with its initial public offering, equity in losses of its associates, acquisition costs and other related charges, among other costs. Consequently, Acquity Group's non-IFRS financial measures should not be evaluated in isolation or as a substitute for IFRS measures, but, rather, should be considered together with its consolidated financial statements, which are prepared according to IFRS.

Special Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "aim," "anticipate," "believe," "confident," "continue," "estimate," "expect," "future," "intend," "is currently reviewing," "it is possible," "likely," "may," "plan," "potential," "will" or other similar expressions or the negative of these words or expressions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. In particular, the section entitled "First Quarter 2013 Outlook" in this announcement consists of forward-looking statements. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements and are subject to change, and such change may be material and may have a material adverse effect on the Company's financial condition and results of operations for one or more periods. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained, either expressly or impliedly, in any of the forward-looking statements in this announcement. Potential risks and uncertainties include, but are not limited to, the risks outlined in the Company's Registration Statement on Form F-1 and other documents filed with the U.S. Securities and Exchange Commission. Unless otherwise specified, all information provided in this announcement and in the attachments is as of the date of this announcement, and the Company does not undertake any obligation to update any such information, except as required under applicable law.

About Acquity Group Limited

Acquity Group Limited is a leading Brand eCommerce™ and Digital Marketing company that leverages the Internet, mobile devices and social media to enhance its clients' brands and e-commerce performance. It is the digital agency of record for a number of well-known global brands in multiple industries. Acquity Group Limited has served more than 600 companies and their global brands through thirteen offices in North America. For more information about Acquity Group Limited, visit www.acquitygroup.com.

SOURCE Acquity Group LLC