Media intelligence and data technology company Isentia Group (ASX: ISD) has announced it will close its loss-making North Asia operations and, instead, partner up with a Hong Kong-based data analysis firm Wisers Information to continue servicing clients in the region.
Isentia said it will work with the “leading provider of big data smart business intelligence solutions” to transition clients in Beijing, Shanghai, Hong Kong and Taiwan to ensure they continue to have access to media intelligence and insights.
In addition, the company has reached agreement to sell its stake in its Korean business to its local partner and exit this market.
Isentia managing director and chief executive officer Ed Harrison said the decision to close its North Asian operations was not taken lightly.
“The exit streamlines our business and clears the path for innovation to reach all our markets simultaneously,” he said.
“The strategic alliance with Wisers represents a unique opportunity to transition our clients to a leading local business intelligence provider and to explore the possibility of further collaboration in other regions,” Mr Harrison added.
Closure of loss-making operations
Isentia claimed its decision to exit the non-core North Asia operations came down to the “poor alignment of the assets with the rest of the business” and that substantial capital investment would be needed to meet customer requirements and achieve scale in these markets.
For the full 2020 financial year, the assets are expected to contribute $8.7 million and an earnings before interest, tax, depreciation and amortisation (EBITDA) loss of $1.3 million.
The company said the exit is expected to result in one-off cash closure costs amounting to $3-$4 million, which will be incurred over the next 12 months, mostly in the first half of fiscal 2021.
There may be a non-cash impairment against the carrying value of the assets but this will not impact existing banking covenants, Isentia added.
The operations will be treated as discontinued in the fiscal 2020 accounts.
Continued focus on South East Asia
Unlike North Asia, Isentia said revenue from its South East Asian operations is “highly recurring and continues to record strong growth”.
The company is a leading provider of social media analytics in this market and has close partnerships with local and multi-national clients.
“Driving scale in this region remains a strategic priority for Isentia through targeted investment in multi-market sales, product development and technology,” the company stated.
Isentia said the “essential nature” of its products and services, especially during a crisis, has mitigated the impact on the COVID-19 pandemic on the business.
Mr Harrison said the company has recorded an increased utilisation of its Mediaportal platform in recent months.
“Our incredible team has worked hard to ensure that our clients received the most up-to-date and relevant media intelligence to support their decision-making during this critical time,” he said.
Isentia has provided an earnings guidance for the 2020 financial year in the range of $20-$21 million.