GHL System Berhad Annual Report 2018

a n n u a l r e p o r t 2 0 1 8 11 MANAGEMENT D I SCUSS I ON AND ANA LYS I S C O N T ’ D 2. DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS AND CONDITIONS (cont’d) 2.4 Profit Attributable to Equity Holders of the Group The profit attributable to equity holders of the Group increased to RM24.5 million, a +20.0% improvement yoy. Fully diluted earnings per ordinary share for the year amounted to 3.47 sen, an improvement of +11.22% yoy. These financial measurements reflect the improvement in the Group’s results in 2018. 2.5 Annuity versus Non-Annuity Revenues Annuity vs Non-Annuity Revenue 88.5% 11.5% 90.7% 9.3% Total RM253.7m 2017 (RM’mil) 23.6 230.1 Annuity Non-annuity 34.4 264.7 2018 (RM’mil) Total RM299.1m 90% 100% 80% 70% 60% 50% 40% 30% 20% 10% 0% Revenue By Business Segment 61.0% 34.2% 71.9% 21.9% 6.2% 4.8% Total RM253.7m 2017 (RM’mil) 15.7 182.3 TPA Solution Services 14.6 182.4 2018 (RM’mil) Total RM299.1m 250.0 300.0 200.0 150.0 100.0 50.0 0% 55.7 Shared Services 102.1 e-pay (All stated in RM'millions unless stated otherwise) Transaction Value Processed 3,763.3 3,684.9 -2.1% Gross Revenue 139.4 124.8 -10.5% Gross Revenue / Transaction Value (Note 1) 3.7% 3.4% -8.1% Gross Profit 45.6 43.9 -3.7% Gross Profit / Transaction Value (Note 1) 1.2% 1.2% - Merchant Footprint - e-pay Only (Thousands) 36.4 38.0 4.4% YTD 2017 YTD 2018 % change The annuity based revenue component within the Group’s total revenue remains high at 88.5% in 2018 although this was lower when compared to 90.7% in 2017. Although annuity based income continued to grow yoy, 2018 saw higher hardware sales in the Thailand market. The Group’s strategy is to grow the TPA and other businesses that have strong recurring annuity based revenue and to continue to support our main bank customers with their hardware and software requirements. As TPA gathers momentum in all geographical markets, we expect that annuity revenues will grow even stronger. 2.6 Liquidity and Capital Resources As at 31 December 2018, the Group’s Net Cash Position (Note 1) amounted to RM110.5 million (31 December 2017 – RM73.3 million). The key items that impacted the Group’s cashflow in 2018 were as follow:- (Note 1 – Defined as Total Cash and Bank Balances less all Bank Borrowings and Hire Purchase obligations) (i) Net cash generated from operating activities decreased to RM2.5 million (2017 – RM56.4 million), mainly due to a) an increase in working capital requirements of RM53.9 million from an increase in receivables (RM39.1 million), and an increase in inventories (RM42.3 million). This was offset by an increase in trade, other payables and advanced payments (RM24.4 million) and increase in operating profit before working capital changes of RM3.8 million and also an increase in tax and interest paid of RM0.2 million. (ii) An a ou t of RM22.5 million (2017 – RM28.8 million) was expended on capital expenditure which was mostly in respect of the Group’s purchases of EDC terminals. These outflows were partly cushioned by the disposal of assets of RM3.6 million (2017 – RM2.9 million). (iii) The Group repaid RM89.5 million of its bank borrowings and hire purchase payables in 2018 (2017 – RM19.7 million). The Group also drew-down fresh bank loans in 2018 of RM86.5 million (2017 – RM16.0 million). The net effect of these financing activities increase the Group’s overall borrowings by RM85 million (2017: RM4.0 million) in 2018.