Datasonic Group Berhad Annual Report 2021

2021 ANNUAL REPORT 29 Customer Concentration Risk As majority of our revenue sources depend on the contracts provided by Government agencies, we may be materially and adversely affected if we were to lose one or more of our major customers or contracts without securing new customers to replace the loss of business. We have a proven track record on the timely delivery of products and services aswell as deep technical knowledge as an ICT solution provider. These factors, coupled with our strong emphasis on customer satisfaction, provide us with strong competitive advantages and increase the stickiness with our customers. At the same time, we are constantly on the lookout for new business opportunities including our digital ID initiatives to expand our revenue streams, which is aligned with our business direction and core competencies. Operational Disruptions We are dependent on all our operations to run smoothly and efficiently. Any disruptions or unplanned shutdowns may have an adverse impact on our performance. In FY2021, our business operations were temporarily halted due to the various movement restrictions imposed to flatten the curve of the COVID-19 pandemic. Since the resumption of our operations, the Group has been complying to the stringent SOPs and mitigation measures were put in place to prepare us for any circumstances. However, external business risks such as natural disasters, pandemics, riots and general strikes are beyond our control, which may materially and negatively affect our operations. PROSPECTS FOR FY2022 Going into FY2022, while we anticipate the economic landscape to remain challenging as a result of the ongoing COVID-19 pandemic, we are upbeat on our prospects underpinned by the gradual recovery of the economy. Malaysia’s gross domestic product (“GDP”) growth is expected to revive, benefitting from the improvement in global demand, a turnaround in public and private consumption as well as the economic recovery following the rollout of COVID-19 vaccination exercise. In-turn, this will lead to the reopening of borders, which bodes well for Datasonic. According to the World Bank, Malaysia’s GDP is projected to rebound by 4.5% in the current year. Reopening of Borders The travel restrictions imposed have significantly impacted international travel and the demand for passports. However, this is a temporary headwind for us as passports are time-dated documents with a 5-year validity period. Furthermore, there is a large number of passports that have expired or due for expiration with less than six (6) months from expiration date. Therefore, we expect a substantial increase in the demand of passports once the international travel restrictions are lifted. In anticipation of the huge upcoming wave of passport renewals, we are readying ourselves to ensure that we will continue to provide smooth and on-time delivery of passports. The Group is streamlining our operations and cost efficiencies as well. For our manufacturing plants, we are closely managing our supply of raw materials to avoid any disruptions and are constantly engaging with our clients on the delivery and schedule planning. MANAGEMENT DISCUSSION & ANALYSIS