Sasbadi Annual Report 2017

MESSAGE TO SHAREHOLDERS SASBADI HOLDINGS BERHAD (1022660-T) 8 On behalf of the Board of Directors (“the Board”) of Sasbadi Holdings Berhad (“Sasbadi Holdings” or “the Company”), it is our pleasure to present to you the Annual Report and the Audited Financial Statements of Sasbadi Holdings and our subsidiaries (“the Group”) for the financial year ended (“FYE”) 31 August 2017. Financial Review In the past year, the Group has seen increasingly difficult industry and economic situations, culminating in weak retail market conditions. In this regard, the Group recorded only a marginal increase in revenue of RM0.36 million (equivalent to 0.4%) from RM92.69 million for FYE 31 August 2016 to RM93.05 million for FYE 31 August 2017, while the Group’s gross profit remained at RM45.52 million and the net profit attributable to owners of the Company declined by RM8.65 million (equivalent to 51.8%) from RM16.69 million for FYE 31 August 2016 to RM8.04 million for FYE 31 August 2017. The marginal increase in revenue was due to the consolidation of the full year’s results of United Publishing House (M) Sdn Bhd and its subsidiaries (“UPH Group”) (which was acquired by the Company in August 2016), and higher revenue recorded by Sanjung Unggul Sdn Bhd and its subsidiaries (“SUSB Group”) and MindTech Education Sdn Bhd, but offset by lower revenue recorded by Sasbadi Sdn Bhd (“SSB”), Malaysian Book Promotions Sdn Bhd (“MBPSB”), Sasbadi Learning Solutions Sdn Bhd and Orbit Buku Sdn Bhd. The decline in net profit attributable to owners of the Company was mainly due to the lower profits recorded by SSB arising from lower revenue for FYE 31 August 2017, and higher operating costs recorded by the Group in FYE 31 August 2017 arising from, among others, higher cost of amortisation of intellectual properties, impairment loss on trade receivables and higher interest expense. In addition, in FYE 31 August 2016, the Group recognised an exceptional bargain purchase gain of RM4.32 million arising from the acquisition of the UPH Group. In terms of earnings per share (“EPS”), the Group’s EPS decreased by 2.21 sen (equivalent to 53.5%) from 4.13 sen for FYE 31 August 2016 (restated to reflect the effects of the 1-for-2 bonus issue completed by the Company on 14 August 2017) to 1.92 sen for FYE 31 August 2017. The equity attributable to owners of the Company was RM145.38 million as at 31 August 2017 vis-à-vis RM147.64 million as at 31 August 2016, while the Group’s debt-to-equity ratio was 0.25 times as at 31 August 2017 vis-à-vis 0.14 times as at 31 August 2016. Further details on the review of the Group’s financials and operations are presented in the Management Discussion and Analysis section of this Annual Report. Prospects In anticipation of the continued weak retail market conditions, the Group has been stepping up our efforts to diversify beyond the core academic segment into new revenue streams where we do not have a significant presence. The Group has also been streamlining and leveraging resources within the Group to maximise efficiency and effectiveness. The Group was unable to reap the rewards of these efforts during FYE 31 August 2017 as the efforts had not fully turned on, but we believe they will contribute more significantly to the Group in the coming financial years. In addition, the Group will continue to capitalise on our Government’s agenda with regard to Science, Technology, Engineering and Mathematics (“STEM”) and smart classroom solutions by utilising the Group’s existing and expanding digital solutions, technological know-how, as well as 21st Century learning tools and products. The Group will also continue to explore opportunities for synergistic collaborations with third parties that have similar drive and agenda, and to pursue growth in our market share of the direct users market via our network marketing/direct sales business. Premised on the above and barring any unforeseen circumstances, the Group is positive of our prospects and performance for the financial year ending 31 August 2018 despite the poorer-than-expected results for FYE 31 August 2017. Appreciation We are grateful and appreciative to all our shareholders, our fellow Board members, the leadership team and employees, our customers and our suppliers, associates and business partners for their unwavering support during FYE 31 August 2017. The Group humbly requests for your continuing contribution, support and trust for the years ahead. Dato’ Salleh Bin Mohd Husein Independent Non-Executive Chairman Law King Hui Group Managing Director